The Management of Techno Appliances Ltd. were presented with the following financials during the Board Meeting

Balance sheet as at 31^st March 2021.

Long term borrowings Loan from Financial Institutions 40000 -

Short term Borrowings Bank Overdraft 50000 -

Short term Provision provision for tax 18000 12000

Other Current assets Prepaid expenses 800 1000

Additional Information

Equipment costing Rs.50000/- was sold during the year at a loss of Rs.23000/-

Depreciation charged on Equipment during the year was Rs.42000/-

Tax paid during the year amounted to Rs.14000/-

Loan from Financial Institutions was taken on 1^st June 2020 @ 12% p.a interest. The total interest has been serviced till the end of March 2021

Interim dividend was paid on the share capital at 8% during the year

Though the cash and cash equivalents at the beginning of the year was Rs.39000/-, the closing balance decreased to Rs.5200/- and also an overdraft of Rs.50000/- was availed by the company.

The management failed to understand why an overdraft of Rs.50000/- had to be availed from the Bank in spite of the company running in profits continuously for the past 4 years and having sufficient cash balance at the beginning of the year.

You are required to analyze the reasons for availing the OD facility by

preparing the cash flow statement and

give your suggestions on how to fund the future expansion of the business and repay the overdraft in full.

Ralanco chont ac at 21st March 2021