Answer to Question #210315 in Finance for inam

Question #210315

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?


1
Expert's answer
2021-06-28T17:25:02-0400

The cash flows statement using the direct method is as follows


The cash as on the first date of 2019"=\\$53,000"

The cash from the activities in 2019"=(\\$510,000)"

Hence net cash deficit at the end of 2019"=\\$53,000-\\$510,000 =(\\$457,000)"

The cash as on the first date of 2020"=\\$31,000"

The cash from the activities in 2020"=(\\$566,000)"

Hence net cash deficit at the end of 2019"=\\$31,000-\\$566,000 =(\\$535,000)"

Hence the firm has no cash for the investment opportunity.


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