Copyright 2012 Dorling Kindersley (India) Pvt.

Ltd

Chapter9:CashFlowStatement
Solutions to problems and cases Try it Yourself
1. Completed Table is given below

Particulars Increase or decrease in Cash Cash & Cash Equivalent at the end of the year at the beginning of the year Increase or (decrease) in cash Cash Flow during the year i. Operating Activities ii. Investing Activities iii. Financing Activities Net Cash Flow (i+ii+iii) 2. Finding the amount of tax paid:

Zip Ltd

Zap Ltd

Zoom Ltd

43.88 69.00 -25.12 -76.11 -10.77 61.76 -25.12

107.87 89.22 18.65 23.32 -98.12 93.45 18.65

298.78 230.45 68.33 312.55 -163.48 -80.74 68.33

Provision for Tax as per previous year Balance Sheet: Add: Provision made in the current year: Total Provision Less: Provision in the current year Balance Sheet Taxes Paid during the year

`million 97.00 103.00 200.00 108.00 92.00

Sanjay Dhamija

Financial Accounting for Managers

Copyright 2012 Dorling Kindersley (India) Pvt. Ltd

3. Cash Flow from Operating Activities: Cash Flow from Operating Activities Profit Before Tax Add: Depreciation Interest and Finance Charges Less: Interest Earned Cash Flow before working capital changes Add: Increase in Sundry Creditors Less: Increase in Inventories Less: Increase in Sundry Debtors Cash Flow from Operating Activities before Tax Less: Taxes Paid ` Million 50.8 32.29 21.77

54.06 27.43 77.43 5.21 12.76 32.46 37.42 14.48 22.94

Taxes Paid = Provision as on 31st March 2010 + Provisions Made during the year Provisions as on 31st March 2011 = `14.48 m + `17.46 m - `17.46 m = `14.48 million

Sanjay Dhamija

Financial Accounting for Managers

Copyright 2012 Dorling Kindersley (India) Pvt. Ltd

4. Preparation of Cash Flow Statement: The Cash Flow Statement for Seven Wonders Limited for the year 2010-11 is given below:
Cash Flow Statement for the year 2010-11 Cash Flow from Operating Activities Profit Before Tax & Extra Ordinary Items Add Back: Depreciation Provision for doubtful debts Loss on Sale of Long term Investments Interest Expense Less: Interest Income Gain on Sale of Asset Dividend Income Cash Flow before working capital Changes Less: Increase in debtors Less: Increase in Inventories Add: Increase in Creditors

1901 675 10 45 438 212 95 89

1168

-396 2673 -369 -596 1040 2748 -342 2406 -245 2161

Less: Extra Ordinary Loss Cash flow from Operating Activities before Tax Less: Taxes Paid Cash flow from Operating Activities Cash Flow from Investing Activities Fixed Assets Acquired Purchase of Long Term Investments Sale of Long Term Investments Sales of Fixed Assets Interest received Dividend received Cash Flow from Investing Activities Cash Flow from Financing Activities Issue of Shares Share premium received Proceeds from Long Term Loans Long Term Loans Repaid Dividend Paid Dividend Distribution Tax Paid Interest Paid

-4250 -765 155 602 186 89 -3983 100 2000 790 -1750 -435 -74 -366

Sanjay Dhamija

Financial Accounting for Managers

Copyright 2012 Dorling Kindersley (India) Pvt. Ltd

265 Net Change in Cash & Cash Equivalents Opening Balance Cash Short Term Investments Closing Balance Cash Short Term Investments Change -1557

C A+B+C

446 2087

2533

304 672

976 -1557

Working: a. Taxes Paid = Provision on 31st March 2010 + Provision Made during the year Provision on 31st march 2011 = 233+490-478 = `245 million b. Sale of Long Term Assets = Net Block on 31st March 2010 + Assets Acquired Net Block on 31st March 2011 Depreciation + Gain on Sale = 3104 + 4205 6172 675 + 95 = `602 Million c. Sale of Long Term Investments = Investment on 31st March 2010 + Investment Made Investments on 31st March 2011 Loss on Sale =955+765 1520 45 = `155 Million d. Interest Received = Interest earned Interest Receivable on 31st March 2011 + Interest Receivable on 31st March 2010 = 212 48 + 22 = `186 Million e. Issue of shares = Share Capital on 31st March 2011 Share Capital on 31st March 2010 Bonus Shares Issued during the year = 970 435 435 = `100 Million f. Proceeds from long term loans = Long Term Loans on 31st March 2011 + Loans Repaid Long Term loans on 31st March 2010 = 2910+1750 -3870 = `790 Million g. Interest Paid = Interest Expenses + Interest Outstanding on 31st March 2010 Interest Outstanding on 31st March 2011 = 438 +15 -87 = `366 million

Sanjay Dhamija

Financial Accounting for Managers

Copyright 2012 Dorling Kindersley (India) Pvt. Ltd

Case 5.1: `Where has the Cash Gone - Cash Flow Statement of New Age Limited
Cash Flow Statement Cash Flow from Operating Activities Profit Before Tax Add : Non Cash Expenses Depreciation 495000 Provision for doubtful debts 73500 Add: Non Operating Expenses Interest on Debentures Cash Flow before working capital changes Add : Increase in Current Liabilities Sundry Creditors 670000 Less : Increase in Current Assets Inventories Debtors Salary Advance Less : Advance Tax Paid Cash From Operating Activities Cash Flow From Financing Activities Increase in Share Capital Increase in Debentures Interest Paid Charged in P&L Less : Accrued Cash Flow from Investing Activities Purchase of Fixed Assets Increase in Cash & Bank Balance Reconciliation Opening Cash & Bank Balance Change in Cash & Bank Balance Closing Cash & Bank Balance 0 37850 37850

1141350

568500 250000 1959850

670000 625000 1097000 48000

1770000 859850 275000 584850

`A'

4400000 2500000 -250000 125000

-125000 6775000 -7322000 -7322000 37850

`B'

`C' `A+B+C'

Sanjay Dhamija

Financial Accounting for Managers

Copyright 2012 Dorling Kindersley (India) Pvt. Ltd

Case 5.2 : Preparation and Interpretation of Cash Flow Statement Container Corporation of India Limited Cash Flow Statement
` Crores 1007.08 135.1 148.41 0.02 4.5 1.91 7.03 1003.41 368.49 634.92 303.3 0.14 37.46 148.41 6 198.21 212.92 212.92 1765.72 1989.51 223.79

NetProfitBeforeTax Adjustmentfor: Depreciation/Amortization Interest&DividendIncome Provisionfordoubtfuldebts/advances DecreaseinTrade&OtherReceivables IncreaseinInventories IncreaseinTradePayable&Provision DirectTaxespaid CashFlowfromOperatingActivities InvestingActivities PurchaseofFixedAssets SaleofFixedAssets PurchaseofInvestment Interest,Dividend&OtherIncome Advances/loansJointVentures&Subsidiary CashflowfromInvestingActivities FinancingActivities Dividendpaid(includingtaxondividend) CashflowfromFinancingActivities OpeningBalanceofCash&CashEquivalents ClosingBalanceofCash&CashEquivalents IncreaseinCash&CashEquivalents

Sanjay Dhamija

Financial Accounting for Managers

Copyright 2012 Dorling Kindersley (India) Pvt. Ltd

Case 5.3: Analysis of Cash Flow Statement of Suzlon Entergy Limited

1. 2009 the company has a PBT of `432.96 Crores but due to increase in debtors (`1443.93 Crores), increase in loans and advances (`220.25 Crores) and exceptional item (`521.67 Crores), the cash flow from operating activities was negative (-`391.17 Crores). 2010 the company has a negative PBT of -`799.67 Crores but due to decrease in debtors (`1760.80 Crores), decrease in inventories (`585.82 Crores) it has a positive cash flow (2423.62 crores) from operating activities. 2. In 2009 the debtors have increase by `1443.93 Crores and 2010 there is decrease of debtors by `1760.80 Crores. 3. Major portion of cash used in investing activities is towards investment in subsidiaries (`2678.71 Crores and `990.24 Crores respectively) and loans granted to subsidiaries (`2373.27 Crores and `3491.98 Crores respectively). Purchase of fixed assets in comparison is not significant (`288.67 Crores and `219.96 Crores respectively). 4. During 2009, the company raised `2861.02 Crores from short term borrowings, `590.00 Crores from long-term borrowing and `300 Crores by issue of debentures. During 2010, the company raised `522.97 Crores by issue of GDR, `2781.42 Crores from long term borrowings, `452.64 crores from zero coupon convertible bonds and repaid `2023.57 crores of short term borrowings.

Sanjay Dhamija

Financial Accounting for Managers