Cash Flow Statement

1
Case
Continental Equipment Company

The managing director of Continental Equipment Company was surprised to
find decrease in working capital fro 1999, when he reviewed the financial
statement for the year. He had planned to acquire a new machine by issuing
shares and by utilizing the profit of the year. He had expected working
capital to remain at the level of the year 1998.

The financial statements of the company are given below:

Balance Sheet as on March 31,1999


ASSETS
Current assets:
Cash
Debtors
Stock
Prepaid expenses
Total current assets
Investments
Plant and machinery, net of depreciation
Total assets

LIABILITIES
Current liabilities:
Creditors
Bank loans
Accrued expenses
Income tax payable
Total current liabilities
Debentures
Shareholders equity
Share capital ,Rs. 10 par value
Share premium
Reserves and surplus
Total liabilities

1999


5,25,000
3,10,000
7,85,000
15,000
16,35,000
4,00,000
18,00,000
38,35,000



2,10,000
1,20,000
50,000
3,00,000
6,80,000
7,50,000

10,00,000
4,00,000
10,05,000
38,35,000
1998


7,50,000
3,75,000
6,92,000
18,000
18,35,000
2,80,000
8,00,000
29,15,000



2,29,000
1,12,000
36,000
1,80,000
5,57,000
900,000

4,20,000
2,80,000
7,58,000
29,15,000






Cash Flow Statement
2

Profit and Loss Account for the year ended March 31, 1999

Sales
Cost of goods sold
(Including depreciation on machinery Rs. 1,40,000)
Gross profit
Operating expenses
Operating profit
Profit on sale of asset *
Profit before interest and tax
Interest
Profit before tax
Provision for tax
Net profit
34,00,000
19,20,000

14,80,000
7,80,000
7,00,000
3,000
7,03,000
60,000
6,43,000
2,96,000
3,47,000

*The book value of the equipment as on 31
st
march 1998 was Rs. 4,000 and it
was bought for Rs. 10,000 six years ago .the equipment was sold in the
beginning of April 1998.

Prepare Cash Flow Statement