Solution 16.6


Note: The dividends figure on the income statement for 2013 should read €900 (not €600)



Overall cash flow

O/Bal

C/Bal

NCF


€’000

€’000

€’000

Bank

220

10

(210)

Short-term investments

75

50

(25)

bank loans and overdrafts

(10)

(110)

(100)


285

(50)

(335)


Statement of Cash Flow


Cash flows from operating activities

€(‘000)


€(‘000)

€(000)

Operating profit



2,635



Add:






Depreciation for year

780





Loss on sale of fixed assets

185





Increase in provisions

0


965



Changes in Working Capital






Add: Decrease in current assets – receivable

25





Decrease in current assets - inventories

25





Decrease in current liabilities - accruals

(5)





Increase in current assets - prepayments

(2)





Increase in current liabilities – payables

280


323



Cash generated from operations



3,923



Finance Interest Paid

(600)




Taxation Paid

(490)


(1,090)



Net cash generated by operating activities



2,833


2,833







Cash flows from investing activities






Proceeds on disposal of fixed assets



135



Payments to acquire fixed assets



(5,363)



Net cash generated from investing activities



(5,228)


(5,228)







Cash flows from financing activities (note 5)






Proceeds from borrowings



1,020



Proceeds from issue of equity shares



1,940



Dividends Paid



(900)



Net cash generated from financing activities



2,60


2,060

OVERALL CASHFLOW





(335)



The following points should be made

Overall there was negative cash flow of €335,000 for the year. The company started the year with a positive cash balance of €285,000 and at the year end the company was in a net overdraft of €50,000


Identify main sources of cash

  1. Operating activities – The cash generated from operations was €3923 compared to the operating profit figure of €2,635. Thus the operating cash to operating profit ratio amounts to 149% mainly due to depreciation charges in the income statement. This needs to be compared to previous years to assess the trend.

  1. Net cash generated from operating activities accounted for 48% (2833/5928) of the total cash generated


3.

Sale of fixed assets yielding €135,000

4.

Issue of debentures. – long term debt increased by 16%

5.

Issue of shares

5.

bank overdraft


Identify main uses of cash

1

Dividend payments

2

Taxation

3

Investment in non-current assets which amounted to €5,363 and increased non-current


by 25%. This investment was financed through a mixture of


equity (including operating cash) and debt financing

5

Purchase of s/t investments.

Overall 48% of the company's cash requirement was financed through operating activities. The main item of expenditure was the investment in fixed assets which has partly financed through a share and debt issue as well as the cash generated from operating activities.