Caterpillar is the largest industry who makes constructionequipment. Company is

Question

Caterpillar is the largest industry who makes constructionequipment. Company is interesting to build a new Crain which canwork on 400 meter heights. Company look for debt financing fromCrescent bank for this project. The bank is interesting to learnthe financial position of the business. Thus for the loan andadvance committee of the bank demanded a cash flow statement of thecompany. Caterpillar company has provided the cash flow statementbut the bank loan and advances committee did not agreed with thisstatement, for that purpose bank retained some information fromcompany during the year of 2009.the information’s are givenas follows:
Purchase real estate for Rs.550, 000 cash, which was borrowed frombank.
Sold investment securities for Rs.550, 000
Paid dividend of Rs.50 Caterpillar is the largest industry who makes constructionequipment. Company is interesting to build a new Crain which canwork on 400 meter heights. Company look for debt financing fromCrescent bank for this project. The bank is interesting to learnthe financial position of the business. Thus for the loan andadvance committee of the bank demanded a cash flow statement of thecompany. Caterpillar company has provided the cash flow statementbut the bank loan and advances committee did not agreed with thisstatement, for that purpose bank retained some information fromcompany during the year of 2009.the information’s are givenas follows:

Explanation / Answer

Cost of Purchase of Investments is not given & henceprofit/loss on Sale of investments is not ascertained. Assume thatInvestment is sold for no loss, no profit basis. Based on given info, Cash Flow from Investing Activities Add: Proceeds from Sale of Investments: 550,000 Less: Purchase of Fixed Assets : (550,000) ----------------------------------------------------------- Cash flow from Investing activities: 0 Cash flow from Financing Activities Add: Loan from bank for Purch of Fixed Assets : 550,000 Less : Dividend Paid:                                             (50) --------------------------------------------------------------------- Cash flow from Financing activities : 549,950 ------------------------------------------------------------- Net Changes in Cash = Cash flow from Investing activities +Cash flow from Financing activities = 0+549,950 = 549,950Thus there is a Positive Cashflow of 549,950 for Caterpillar.

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