Question

(25 MARKS) QUESTION 3 Sime Garby Berhad is a publicly listed company. The following is the Statement of Profit and Loss and the Statements of Financial Position for the company for the year 2017: Statement of Profit or Loss for the year ended 31 December 2017 2017 2016 RM000 BM'000 25.500 17.250 Revenue Cost of sales (14,800) (10.350) Gross profit 10,700 6.900 Distribution costs (2,700) (1.850) Administrative expenses (2,100) (1.450) Finance costs (650) (100) Profit before tax 5,250 3,500 Income tax expense (2,250) (1,000) Profit for the year 3,000 2,500 Statement of Financial Position as at 31 December 2017 2017 2016 RM 000 RM"000 RM'000 RM'000 Assets Non-current assets Property, plant and equipment 9.500 5,400 Intangibles 8,200 17,700 5,400 Current assets Inventory 3,600 1,800 Trade receivables 2,400 1,400 Bank 6,000 4,000 Total assets 23,700 12,600 ni! 7,200 Equity and liabilities Equity shares of RM1 each Retained earnings 5,000 4,500 9,500 5,000 2,250 7,250 Non-current liabilities 5% loan notes 8% loan notes 2,000 2,000 7,000

Answer 1

There are cash flow from three types of activities which are operating activities, investing activities and financing activities. Operating activities are day-to-day business activities like purchase, sales and operating expenses. Investing activities are related to investments made like purchase and sales of assets and investments, investment income. Financing activities are related to the finance provided to the business like issue of shares and bonds, long term debt, dividend payments and interest payments.

In indirect method of the cash flow, cash flow from operating activities are calculated as follows:

First start with the net income. Add non-operating and non-cash expenses to the net income. Adjust the net income for changes in the current assets and current liabilties. If the current assets are increased, then subtract. If the current assets are decreased, then add. If the current liabilities are increased, then add. If the current liabilities are decreased, then subtract.

Sime Garby Berhad Statement of cash flow for the year ended December 31, 2017 Amount Amount Particulars (RM'000) (RM'000) Cash flow from operating activities 3,000 Net income Add: Non-cash and non-operating expenses Finance cost Depreciation 650 640 4,290 Adjustment of changes in working capital Increase in inventory (3600-1800) Increase in Trade receivables (2400-1400) Increase in Trade payable (2800-2150) Increase in Current tax payable (2200-1200) Cash generated from operating activities -1,800 -1,000 650 1,000 3,140 Cash flow from investing activities Purchase of Propert, Plant and Equipment (Note 2) Purchase of Intangibles Net cash used in investing activities -4,740 -8,200 -12,940 7,000 -650 -750 Cash flow from financing activities Proceeds from 8% loan notes Finance cost Dividend paid (Note 1) Net cash generated from financing activities Change in cash and cash equivalent Opening cash and cash equivalent Closing cash and cash equivalent 5,600 -4,200 4,000 -200

Note 1 - Dividend paid: Opening retained earnings Add: Current year net income 2,250 3,000 5,250 4,500 750 Less: Closing retained earnings Dividend paid Note 2 - Purchase of Property, Plant and Equipment Opening balance Less: Depreciation 5,400 -640 4,760 4,740 9,500 Add: Purchase of asset (balancing figure Closing balance