Question

Calculate Cash Flow from Financing Activities from the following information:
• Buy back of own shares: 1,00,000
• Issue of bonus shares: 50,000
• Current Year Proposed Dividend: 40,000
• Previous Year Proposed Dividend: 10,000

• A. Outflow of 40,000
• B. Outflow of 1,10,000
• C. Outflow of 90,000
• D. Outflow of 1,00,000

Answer 1

The Correct Option is C

\textbf{Cash Flow from Financing Activities is calculated as follows:} 1. Buy back of own shares: This is an outflow of cash. \[ \text{Outflow from Buy Back} = 1,00,000 \] 2. Issue of bonus shares: This does not involve any cash flow as it is a non-cash transaction. Thus, it is not included in cash flow calculations. \[ \text{Outflow from Bonus Shares} = 0 \] 3. Current Year Proposed Dividend: This is also considered a cash outflow. \[ \text{Outflow from Current Year Proposed Dividend} = 40,000 \] 4. Previous Year Proposed Dividend: This will be paid in the current year, so it is considered a cash outflow as well. \[ \text{Outflow from Previous Year Proposed Dividend} = 10,000 \] 5. Total Cash Outflow from Financing Activities: \[ \text{Total Outflow} = \text{Buy Back} + \text{Current Year Proposed Dividend} + \text{Previous Year Proposed Dividend} \] \[ = 1,00,000 + 40,000 + 10,000 = 1,50,000 \] Since the question specifically asks for cash flow from financing activities including dividends paid but excluding non-cash activities (like bonus shares), we summarize:
6. Total Outflow Considered: \[ = 1,00,000 + 40,000 = 1,40,000 \quad (\text{Current Year Dividend and Buy Back}) \] However, considering the previous year’s dividend also as an outflow gives us: 7. Final Cash Outflow Calculation: \[ = 1,00,000 + 40,000 + 10,000 = 1,50,000 \] Since the bonus shares are a non-cash transaction, we only include the amounts actually leading to cash outflow: Thus, total cash outflow would be 90,000, and the final answer choice is as follows: Therefore, the answer is \textbf{(3) Outflow of 90,000}.