Question 2: Looking at the position statement of the firm over the last two years, Hope was quite happy that the performance of the firm had changed for the better. Her friend, Despair, looked over the numbers and appeared unsatisfied with the performance. She suggested, that the best way to look at the performance would be to prepare a cash flow statement of the firm and evaluate it. The balance sheet of M/s Hope Imports Limited, as at March 31, 20x9 and 20x0, are as follows (all figures in INR): M/s Little Flower Imports Limited : Balance sheet as on March 31* (All figures in lakhs) Assets 20x9 20x0 Liabilities & Equity 20x9 20x0 Land 120 120 Share capital 150 150 Machine (Cost less dep) 80 Reserves 30 Investments 10 Debentures Closing stock 20 Proposed Dividend 20 50 Debtors 20 Sundry Creditors 50 Bills Receivable Cash at Bank 5 Total Assets 255 295 Total Liabilities 255 295 100 20 15 15 10 15 50 30 10 6 4 You are also provided with some additional information for the year which is as follows: All figures in lakhs Depreciation on machinery 20 Dividend for 20x9 paid 20 Prepare a cash flow statement to show the cash flow from various activities of M/s Hope Imports Limited. Regarding the cash flow position, whom would you agree with, Despair or Hope? Why? (20 marks)