Cash Flow Statement Preparation

 

Cash Flow Statement Preparation

Below is the detailed cash flow statement based on the given data and its analysis:

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1. Cash Flow from Operating Activities

Description	Amount (£k)
Operating Profit	230
Add: Depreciation (non-cash expense)	25
Add: Loss on sale of car (non-cash)	4
Less: Increase in SWIP (-310 + 256)	-54
Less: Increase in debtors (-145 + 120)	-25
Add: Increase in creditors (99 - 85)	14
Net Cash from Operating Activities	194

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2. Return on Investment and Servicing of Finance

Description	Amount (£k)
Less: Interest charges	-18
Add: Investment income	7
Net Cash from Financing Activities	-11

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3. Capital Expenditure

Description	Amount (£k)
Less: Purchase of fixed asset (CNG)	-45
Add: Sale of car	8
Net Cash from Capital Expenditure	-37

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4. Financing

Description	Amount (£k)
Add: Issue of ordinary share capital	25
Less: Mortgage redemption	-110
Net Cash from Financing	-85

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5. Taxation and Dividends

Description	Amount (£k)
Less: Corporate tax paid	-27
Less: Dividends paid	-22
Net Cash from Taxation/Dividends	-49

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Summary of Cash Flow

Activity Category	Net Cash Flow (£k)
Net Cash from Operating Activities	194
Net Cash from Return on Investment/Finance	-11
Net Cash from Capital Expenditure	-37
Net Cash from Financing	-85
Net Cash from Taxation/Dividends	-49
Net Cash Flow	12

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Key Takeaways

• Net Cash Flow: The business ends with a positive cash flow of £12k.
• Liquidity Impacts:
  • SWIP Increase: £54k tied up in inventory reduced available cash.
  • Debtors Increase: £25k less cash available from unpaid sales.
  • Creditors Increase: £14k helped by delaying payments to suppliers.
• Financing:
  • Positive cash inflow from the issuance of share capital.
  • Significant outflow from mortgage repayment (£110k).

The company appears to maintain positive liquidity despite some cash tied up in working capital and significant financing outflows.

Pooja Mattapalli