Consider the following:

£m Revenue 320 Cost of sales (143)

Gross profit 177 Investment income – interest received 5 Loss on disposal of equipment (8)

Depreciation (39)

Administrative and selling expenses (13)

Operating profit before interest 122 Interest expense (6)

Profit after deducting interest 116 Taxation (39)

Profit after tax 77 Statements of financial position (balance sheets) at 31 December Year 2 Year 1 £m £m £m £m Property, plant and equipment at cost 225 150 Accumulated depreciation (90) (60)
135 90 Investment 70 100 Inventory (stock) 30 22 Trade receivables (debtors) 27 24 Cash and cash equivalents 48 8 105 54 Trade payables (creditors) (21) (20)
Interest payable (9) (11)
Taxes payable (12) (9)
(42) (40)
63 14 Long-term loans (20) (15)
Net assets 248 189 Share capital 144 140 Share premium 26 23 Retained earnings 78 26 248 189 Further information 1 The dividend paid during Year 2 was £25m. The retained earnings increased by £77m profit of the period and decreased by the amount of the dividend, £25m.
2 During Year 2 the company acquired property, plant and equipment costing £94m.
3 During Year 2 the company sold for scrap property, plant and equipment that had an original cost of £19m and accumulated depreciation of £9m. The proceeds of disposal were £2m.
4 Investments were sold during the year for cash proceeds of £30m. There were no purchases of investments.
Required 1 Prepare a statement of cash flows using

(a) the direct method and

(b) the indirect method of calculating operating cash flow.
2 Write a comment on the cash flow of the period.AppendixLO1