(Contd.) Net cash from operating activities $2,50,000 Cash flows from investing activities: Purchase of fixed assets (2,00,000) Sale of fixed assets 1,00,000 Net cash used in investing activities (1.00,000) Cash flows from financing activities: Issue of equity shares 3,00,000 Repayment of bank loan (3,00,000) Dividend (50,000) Net cash used in financing activities (50,000) Net increase in cash and cash-equivalent 1,00,000 Cash and cash equivalent at beginning of year 50,000 Cash and cash equivalent at the end of year 1,50.000 P.5.4 Charatlal, the president and majority shareholder, was a superb operating executive. He was an imaginative, aggressive marketing man and an ingenious, creative production man. But he had little patience with financial matters. After examining the most recent balance sheet and income statement, he muttered, "We have enjoyed ten years of steady growth, this year was our most profitable year. Despite this, we are in the worst cash position in our history. Just look those current liabilities in relation to our available cash! This whole picture of the more you make the poorer you get, just does not make sense. These statements must be cockeyed." The balance sheets (in lakh of rupees) of Charat Engineering Ltd. are given below: March 31 March 31 Current Previous Current Previous Assets year year year Cash 10 Current liabilities Receivables (net) Inventories 50 Long-term debt Plan assets (net of accumulated depreciation) 300 100 Stockholder's equity 207 160 Total assets 462 190 Total equities 462 190 Net income before taxes, 281 lakh. Taxes paid are 227 lakh. Net income was 54 lakh. Cash dividend paid were 37 lakh. Depreciation was 20 lakh. Fixed assets were purchase for 220 lakh, 2150 lakh of which was financed via the issuance of long-term debt outright for cash. Using cash flow statement (based on AS-3), write a short memorandum to Mr Charatlal, explaining why there is such squeeze for cash. Show working. Year Liabilities 105 30 2 60 100 30 150