Given below are the balance sheets of bharathy ltd. For a period of three years as at 31stmarch each.

Rs. In lakhs

201020112012

Liabilities

Share capital in equity shares of rs.10

Each

303535

General reserve

101518

Surplus

589

13% debentures

10510

Bank credit

51015

Trade creditors

101215

Income tax provision

81114

Proposed dividend

610.514

Assets

84106.5130

Plant and machinery

455570

Investments

101520

Stock

121515

Debtors

141512

Cash and bank

36.513

84106.5130

Other Details:

• Depreciation provided in the books:
• 2009-10:Rs.6 Lakhs; 2010-11: rs.8 Lakhs; 2011-12: rs.10 Lakhs
• A part of the debentures was converted into equity at par in september 2010.
• There was no sale of fixed assets during the period.

As you are the management accountant of the concern, the management seeks your advice on the liquidity position of the company. Analyse the case and advice the management using funds flow analysis.

Hint:

• Calculate funds from operations.
• Prepare schedule of changes in working capital.
• Prepare funds flow statement.
• Calculate current ratio and liquidity ratio.

Based on the above workings, suitable advice may be given to the management.