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Question
Read the news item given below and answer the questions which follow:
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Tata Consultancy Services ₹ 17,000 crore share buyback programme will open on December 1 and close on December 7, India’s largest software exporter said on Tuesday. “The company believes that the buyback is not likely to cause any material impact on the profitability or earnings of the company except to the extent of reduction in the amount available for investment, which the company could have otherwise deployed towards generating investment income”, TCS said in a regulatory filing. |
How would the Cash Flow from Investing Activities of TCS be affected, if instead of buying back its shares, the company had proceeded with its investing programme?
Solution
- Outflow of cash to the extent of investment made.
- Inflow of cash – interest income from the investments.
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RELATED QUESTIONS
Based on the following information of Neon Ltd., answer the questions given below in relation to the Cash Flow Statement of the company for the year 2022-23.
| Particulars | 31/03/2023 (₹) | 31/03/2022 (₹) |
| Provision for Tax | 80,000 | 50,000 |
| 7% Debentures | 8,00,000 | 3,00,000 |
| Unclaimed Dividend | 6,000 | - |
| Plant & Machinery (at book value) | 1,00,000 | 1,00,000 |
| Land | 4,50,000 | 6,00,000 |
Note: Dividend proposed in the years 2021-22 and 2022-23 were ₹ 30,000 and ₹ 40,000 respectively.
Additional information:
During the year 2022-23, the company:
- Provided ₹ 75,000 for tax.
- Issued 7% Debentures at a discount of 5%.
- Purchased Plant & Machinery for ₹ 40,000.
- What is the amount of tax paid by the company?
- Give the reason for the opening book value and closing book value of Plant & Machinery remaining the same, despite the purchase of a machine during the year.
- What is the inflow of cash from the issue of 7% Debentures?
- Give the company's outflow of cash for dividend paid to the shareholders.
- State with reason whether Neon Ltd. will consider the decrease in the amount of land as an Operating Activity or as an Investing Activity, while preparing its Cash Flow Statement.
Anand Ltd. reported a loss of ₹ 80,000 for the year ended 31st March, 2024, after considering the depreciation charged on Plant & Machinery represented by ‘??’ and the following items:
| (₹) | |
| (a) Tax provided during the year | 84,000 |
| (b) Loss on sale of Plant & Machinery | 15,000 |
| (c) Interest on Short-term Loans and Advances | 2,000 |
| (d) Depreciation on Plant & Machinery | ?? |
Additional information:
1. During the year 2023-24:
- A machine having a book value ₹ 40,000, was disposed of for ₹ 25,000 and a machine costing ₹ 2,20,000 was purchased.
- Credit sales were ₹ 1,00,000
2. An extract of the balance sheet of the company as at 31st March, 2023, and as at 31st March, 2024:
| Particulars | 31st March, 2024 (₹) | 31st March, 2023 (₹) |
| Trade Receivable | 20,000 | 15,000 |
| Cash at Bank | 8,000 | 10,000 |
| Short-term Loans and Advances | 49,000 | 11,000 |
| Trade Payables | 5,000 | 2,000 |
| Plant & Machinery (At Net Value) | 6,00,000 | 4,90,000 |
| Provision for depreciation | 1,50,000 | 1,10,000 |
- You are required to calculate for the year 2023-24: (Show the workings clearly)
- The net operating profit of the company before working capital changes.
- Cash from Investing Activity.
- Taking the information of credit sales into consideration, state with reason, whether the increase in Trade Receivables in the year 2023-24 over the year 2022-23 will cause the cash from operating activities before tax paid to be more or less then the net operating profit of the company before its working capital changes.
