Caterpillar is the largest industrywho makes construction equipment. Company is

Question

Caterpillar is the largest industrywho makes construction equipment. Company is interesting to build anew Crain which can work on 400 meter heights. Company look fordebt financing from Crescent bank for this project. The bank isinteresting to learn the financial position of the business. Thusfor the loan and advance committee of the bank demanded a cash flowstatement of the company. Caterpillar company has provided the cashflow statement but the bank loan and advances committee did notagreed with this statement, for that purpose bank retained someinformation from company during the year of 2009.theinformation’s are given as follows:

Required:

Now you are the Director finance ofthe crescent bank, by relaying upon that information which has beenprovided by the company, you are required to calculate the value ofnet cash flow under the head of financing activities during theyear 2009 in accordance with IAS-7

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 Add :Issued 1000 ordinary sharesfor        Rs.10,00,000 Less : Dividend Paid:                       (500,000) Less : Paid towards a bank loan:         (Rs.450,000) --------------------------------------------------------------------- Cash flow from Financing activities : 600,000 ------------------------------------------------------------- Net Changes in Cash = Cash flow from Investing activities + Cashflow from Financing activities = 0+600,000 = 600,000 Thus there is a Positive Cash flow from Financingactivities : 600,000 for Caterpillar.

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.