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:

Required:

Now you are the Director finance of the crescent bank, byrelaying upon that information which has been provided by thecompany, you are required to calculate the value of net cash flowunder the head of financing activities during the year 2009 inaccordance with IAS-7

Explanation / Answer

Based on given info, Cash Flow from Investing ActivitiesAdd: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.

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