Question

The following infomation has been extracted from the financial statements of Jones Led on 30/4/2019. Income Statement of Jones Ltd for the year-ending 30 April 2019 Em 587 Sales tumover Cost of goods sold Gross Profil Distribution costs Administrative COSES Operating profil Interest Profit before tax Taxation Profit after tax Dividends Retained Profit for the year Statement of Financial Position of Jones Ltd as at 30 April 2019 2018 sma Tangible non-current assets Current assets: Inventory Trade Receivables Prepaid expenses Cash TOTAL ASSETS 492 1079 476 802 Equity and Liabilities Ordinary shares Share premium Retained profits 184 374 Liabilities Debentures (long-term loans) 141 Current liabilities: Bank Overdraft Trade Payables Taxation 13

Answer 1

1	Jones Ltd.
	Cash Flow Statement
	For Current Year Ended 30 april 2019
		£m
	Cash flow from Operating Activities
	Profit before tax	$231
	Adjustments for
	Depreciation expense	$38
	Interest expense	$7
	Net cash flow before change in working capital	$276
	Decrease in inventory	$24
	Increase in trade receivable	-$33
	Increase in prepaid expense	-$24
	Decrease in bank overdraft	-$20
	Increase in trade payables	$99				Tangible non current assets A/c
	Cash generated from operations	$322				Dr.		Cr.
	Tax paid	-$38	(33+53-48)		op. bal.	331	bank	31
	Net cash generated from Operating Activities	$284					Depreciation	$38
					Cash	$325
	Cash flow from Investing activities
	Purchase of tangible non current assets	-$325					Cl. Bal.	587
	Sale of non current assets	$31
(B)	Net cash used in Investing activities	-$294
('C)	Cash flow from financing activities
	Interest paid	-$5	(3+7-5)
	Issue of Common stock	$54
	Dividend paid	-$39	(13+33-7)
	Payment of debenture	-$17
	Net cash used in financing activities	-$7
	Net Increase/(decrease) in Cash (A+B+C)	-$17
	Cash balance at beg.	$35
	Cash balance at end	$18
	Main changes
	Non current assets purchased worth 325m
	Share capital issued for 54m
	Net cash flow generated from operations was 284m which is a good sign.
	Debenture to the extend of 17m was redeemed.
	Overall cash decreased due to heavy investment in investing activities.
	Utilities of cash flow statement
	To identify the reasons for the reduction or increase in the cash balances irrespective level of the profits earned by the firm. In the above cash Jones Ltd. Cash flows can be anaylsed as reduction in cash was due to heavy investment in non current assets.
	It facilitates the management to maintain an appropriate level of cash resources. Jones Ltd. Can estimated the expected cash flow based on cash flow statements.
	It guides the management to take futuristic decisions on the prospective demands and supply of cash resources through projected cash flows.
	It helps the management to understand its capacity at the moment of borrowing for any further capital budgeting decisions. Currently Jones Ltd. Paid 17 million of debenture and received 54million cash for shares issue.