The managing director of Sigma Co-operative Bank has received the following facts from one of its clients.The bank is considering to sanction a working capital loan to this client.

Additional Information:

(i) Investments costing ₹ 80,000 were sold during the year 2009–10 for ₹ 85,000.

(ii) Provision for tax made during the year 2009–10 was ₹ 90,000.

(iii) During the year part of the fixed asset costing (book value) ₹ 1,00,000 was sold for ₹ 1,20,000 andprofit included in the profit and loss account.

(iv) Dividend paid during the year 2009–10 was ₹ 3,40,000.

Discussion Question

Assume that you are the credit officer of the bank, evaluate the profitability position, short-term liquidity and long-term solvency with the help of cash flow statement.

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A. Sources of Funds Share capital General reserve Profit and loss account Sundry creditors Provision for tax Mortgage loan B. Application of Funds Fixed assets Investments Stock Sundry Debtors Bank Comparative Balance Sheet Particulars 2009 () 4,50,000 3,00,000 56,000 1,68,000 75,000 4,00,000 50,000 2,40,000 2,10,000 1,49,000 2010 () 6,50,000 5,10,000 1,68,000 3,34,000 1,10,000 2,70,000 6,20,000 2,60,000 5,10,000 4,55,000 1,97,000