Question 1
Following are statements of cash flows for Byron Ltd for the years ended 31 December:
|
|
2014
$'000
|
|
2013
$'000
|
|
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Income taxes paid
|
360
(258)
1
(9)
(24)
|
|
223
(180)
-
(5)
(15)
|
|
Net cash flows from operating activities
|
70
|
|
36
|
|
Cash flows from investing activities
Payments for property, plant and equipment
Proceeds from sale of property, plant and equipment
|
(58)
-
|
|
(11)
5
|
|
Net cash flows from investing activities
|
(58)
|
|
(6)
|
|
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from borrowings
Repayment of borrowings
Distributions paid
|
13
28
(23)
(21)
|
|
-
11
-
(12)
|
|
Net cash flows from financing activities
|
(3)
|
|
(1)
|
|
Net increase (decrease) in cash held
Cash at beginning of the reporting period
|
9
23
|
|
16
7
|
|
Cash at end of the reporting period
|
32
|
|
23
|
Byron Ltd's profit for 2013 and 2014 was $19 000 and $42 000 respectively.
Required:
(a) Describe what information and figures in these statements of cash flow employees of Byron Ltd would be interested in and examine. Explain your answer. Also discuss how employees would interpret the cash flows of Byron Ltd.
(b) Describe what information and figures in addition to your answer in (a) above, in these statements of cash flow an investor would be interested in and examine. (Please do not repeat your answer in (a) above). Explain your answer. Also discuss how an investor would interpret the cash flows of Byron Ltd.
(c) Provide one reason as to why the profit for both years is lower than the net cash flow from operating cash flow.
(d) The net cash flows from investing activities for Byron Ltd for both 2013 and 2014 are negative. Discuss whether this is good or bad and whether you would normally expect this figure to be positive or negative.
(e) The net cash flows from financing activities for Byron Ltd for both 2013 and 2014 are negative. Discuss whether this is good or bad and whether you would normally expect this figure to be positive or negative.
(f) Which one of the three activities do you think is the most important cash activity for an entity? Justify your answer.
Question 2
Discuss how each of the three entities below normally trades (i.e. buy and sell). Based on these discussions, which one of the following three entities do you think would have the greatest proportion of their working capital held as cash (compared to the other components of their working capital), and which entity do you think would have the greatest proportion of their working capital held as accounts receivable (compared to the other components of their working capital)?
(a) Local convenience store
(b) Wholesaler of computers
(c) Farmer selling vegetables at a weekend market.