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Que.

1 Prepare Projected Cash Flow Statement and Projected Balance Sheet from the data
given below of M/s Swaraj Ltd.


BALANCE SHEET as on 31
st
March yr.n Projected Income &
Distribution Statement
Liabilities Rs. In
Million
Assets Rs. In
Million
Rs. In
Million
Share Capital 5 Fixed Assets 11 Sales 25
Reserves &
Surplus
4 Investments 0.5 Cost of Goods
Sold
19
Secured loans 4 Current Assets 11.5 Depreciation 1.5
Unsecured
loans
3 Cash 1 Profit before
Interest &
Taxes
4.5
Current
Liabilities
6 Receivables 4 Interest 1.2
Provisions 1 Inventories 6.5 Profit Before
Tax
3.3
During the year n+1, the company wants to raise Secured Term Loan
of Rs 1M, repay previous loan to the extent of 0.5M, acquire F.A. of
Rs. 1.5M, raise inventory by Rs 0.5M. It is anticipated that C.L. and
Provisions, besides Receivables, would increase by 5%. The level of
cash would be the balancing amount in the projected balance sheet.

Tax 1.8
Profit After Tax 1.5
Dividends 1.0
Retained
Earnings
0.5
Solution to the problem of M/s Swaraj Ltd.
Projected Cash Flow Statement (Rs. in million)

Sources of Funds
Profit before interest and tax 4.5 .given
Depreciation provision for the year 1.5 .given
Secured term loan 1.0 .Plan for the year given
Total (A) 7.0

Disposition of Funds
Capital expenditure 1.50 .Plan to aquire fresh assets
Increase in working capital

0.35
Repayment of term loan 0.50 .given
Interest 1.20 .given
Tax 1.80 .given
Dividends 1.00 .given
Total (B) 6.35

Working capital here is defined as :


(Current assets other than cash) (Current liabilities other than bank borrowings)
In this case inventories increase by 0.5 million, 5% increase in receivables mean an increase
by 0.2 million and 5% increase in current liabilities and provisions, mean an increase of 0.35
million. So working capital increases by 0.35 million (0.5 + 0.2 - 0.35)
Opening cash balance 1.00
Net surplus (deficit) (A B) 0.65
Closing cash balance 1.65 .to projected Balance Sheet

Projected Balance Sheet (Rs. in million)
Liabilities Assets
Share capital 5.00 Fixed assets 11.00
Reserves & surplus 4.50 Investments 0 .50
Secured loans 4.50 Current assets 12.85
Unsecured loans 3.00 * Cash 1.65
Current liabilities 6.30 * Receivables 4.20
Provisions 1.05 * Inventories 7.00
24.35 24.35

Working Notes:
Reserves & Surplus = OB + projected Retained Earnings = 4 + 0.5 = 4.5M
Secured Loans = 4 + 1.0 0.5 = 4.5M
Current Liabilities = 6 + 5% increase = 6.30M
Provisions = 1 + 5% increase = 1.05M
Fixed Assets = OB + New Addition - Dep
n
= 11 + 1.5 1.5 = 11M
Receivables = 4 + 5% increase = 4.20M
Inventories = 6.5 + 0.5 = 7.00M