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112 Corporate Finance BRILLIANT’S

OR
Discuss the advantages of cash flow statement. / H¡$e âbmo ñQ>oQ>_|Q> Ho$ bm^ H$s ì`m»`m H$s{OE&
The main uses of cash flow statement for _¡ZoOg© Ho$ {bE H¡$e âbmo ñQ>oQ>_|Q> Ho$ _w»` Cn`moJ
managers are as under: {ZåZ{b{IV h¢…
(a) It provides answer to some typical (a) `h Hw$N> gm_mÝ` àíZm| Ho$ CÎma àXmZ H$aVm h¡ O¡go
questions like why cash position is tight A{YH$ Am` Ho$ ~mX ^r H¡$e H$s pñW{V H${R>Z Š`m|
inspite of high income. h¡&
(b) It helps management in investment (b) `h B§doñQ>_|Q> {ZU©` _| _¡ZoO_|Q> H$s ghm`Vm H$aVm
decisions. h¡&
(c) A comparison of cash flow statement with (c) AZw_m{ZV H¡$e âbmo Ho$ gmW H¡$e âbmo ñQ>oQ>_|Q> H$s
projected cash flow is useful in evaluating VwbZm H¡$e \$moaH$mpñQ>¨J Ho$ _yë`m§H$Z _§o Cn`moJr h¡&
the cash forecasting.
(d) It provides manager sufficient basis to (d) `h _¡ZoOa H$mo g§ñWm Ho$ H¡$e H$s pñW{V H$m AmH$bZ
assess the position of firm's cash. H$aZo H$m n`m©ßV AmYma àXmZ H$aVm h¡&
(e) It helps management to arrange well in (e) `h _¡ZoO_|Q> H$mo n`m©ßV H¡$e H$s CnbãYVm ~hþV
advance for the availability of adequate nhbo go ì`dñWm H$aZo _| ghm`Vm H$aVm h¡&
cash.
(f) It enables the financial manager to assess (f) `h \$m`Z|{e`b _¡ZoOa H$mo g§ñWm H$s {bpŠd{S>Q>r
the liquidity position of the firm. pñW{V H$m AmH$bZ H$aZo _| gj_ ~ZmVm h¡&$
(g) The analysis of cash flow statement can (g) H¡$e âbmo ñQ>oQ>_|Q> H$m {díbofU {S>{dS>|S> Ho$ ^wJVmZ
help management in formulating S>oãQ²>g H$boŠeZ Am{X Ho$ g§~§Y _| C{MV \$m`Z|qgJ
appropriate financing policy regarding
payment of dividend, collection of debts etc. Zr{V ~ZmZo _| ghm`Vm H$a gH$Vm h¡& 

SOLVED PRACTICAL QUESTIONS
DIRECT METHOD / S>m¶ao³Q> ‘oWS>

Illustration 2.2.1
Naman Ltd. entered into the following transactions. Classify each as (i) an operating activity
(ii) investing activity (iii) financing activity (iv) non-cash activity.
Z_Z {b{_Q>oS> Zo {ZåZ{b{IV Q´>m§OoŠe§g {H$`o& àË`oH$ H$m {ZåZ _| dJuH$aU H$s{OE… (i) EH$ Am°naoqQ>J EpŠQ>{dQ>r
(ii) B§dopñQ>¨J EpŠQ>{dQ>r (iii) \$m`Z|qgJ EpŠQ>{dQ>r (iv) Zm°Z-H¡$e EpŠQ>{dQ>r&
Purchase a 120 day Treasury’s Bill. / 120 {XZ H$m Q´>oOar {~b IarXm&
Redeemed 200 Debentures. / 200 {S>~oÝMg© H$m ^wJVmZ

Machinery sold. / ‘erZ ~oMr
Purchase building. / {~pëS>¨J IarXr
Exchange Land and Plant for equity in subsidiary company.
ghm¶H$ H§$nZr ‘| Bp³dQ>r Ho$ {bE b¢S> VWm ßbm§Q> H$m {d{Z¶‘&