Statement of Cash Flows

Question 1

Describe the order of cash flows for operating activites?

Answer 1

Profit before tax
+ Depreciation
+ loss on disposal or - gain on disposal
+ finance costs
+ decrease in inventories or (increase) in inventories
+ decrease in trade receivables or (increase) in trade receivables
+ increase in trade payables or - decrease in trade payables
- dividends received

= Cash generated by operations
- interest paid (finance costs on SPL)
- income tax
= net cash from operating activities

Question 2

Why is depreciation added to profit?

Answer 2

Non cash expense - no money is paid out for depreciation

Question 3

What is the formula for actual amount of tax paid?

Answer 3

Opening balance (SFP)
+ Charge for the year (SPL)
- Closing Balance (SFP)
= The actual amount paid

Question 4

Whats included in cash flows from investing activites?

Answer 4

Purchase of PPE - minus figure
Proceeds on disposal of PPE
Dividends received

Question 5

How to calculate amount of cash spent on PPE?

Answer 5

Carrying amount last year
+ Revaluation amount
- Depr charge for year
- Carrying amount of PPE sold
- PPE at end of current year - Carrying amount
= Total cash spent on additional PPE

Question 6

Name the sections under financing activities?

Answer 6

Proceeds from issuance of share capital (diff between last and this year for share capital + diff between last year and this year for share premium)
Bank Loan
Payment of lease liabilities or Loans
Dividends Paid

Question 7

Is an increase in trade payables a cash inflow or outflow?

Answer 7

Cash inflow - holding onto your cash for longer

Question 8

Is an decrease in trade receivables a cash inflow or outflow?

Answer 8

Cash inflow - less people owe the business money and therefore customers have paid meaning more money

Question 9

Is an increase in inventories a cash inflow or outflow?

Answer 9

Cash outflow - more stock