Answer to Question #210299 in Finance for Muhammad Ali

Question #210299

Q no #3 Sohni Dharti International is a renowned seed company and they want to expand their business. They hire you as a financial expert and provide you following financial records for the years of 2019 and 2020. Company has Cash $53,000 in 2019 and $31,000 in 2020, Marketable securities $87,000 in 2019 and $0 in 2020, Account Receivable $346,000 in 2019 and $528,000 in 2020, Account payable in 2019 is $13,000 and in 2020 is $27,000, Bank borrowing in 2019 is $10,000 and in 2020 is $35,000, common stock is $100,000 in both 2019 and 2020. Being a financial expert prepare cash flow statement by using direct method and then give your opinion whether company has sufficient funds to take advantage of investment opportunities or not?

Expert's answer


The cash flow statement as of 31/12/2020 under the direct method is as below:




According to the cash flow statement, the company does not have enough cash to take advantage of investment opportunities. This is because the company has a negative cash flow at the end of the year.

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