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3 (30 marks) You are given the cash flow statements for the last two years for DBM plc, which are as follows: Cash flow statement
3 (30 marks) You are given the cash flow statements for the last two years for DBM plc, which are as follows: Cash flow statement of DBM plc for the year ended 31 December 2013: 2013 2012 'm 'm Cash flow from operating activities: Profit before tax (1,350) 3,200 Depreciation 2,800 2,600 1,450 5,800 Interest expense 150 200 Decrease/(increase) in inventory 300 (600) Decrease/(increase) in trade receivables 200 (400) Increase/(decrease) in trade payables 100 (100) Cash flow from operations 2,200 4,900 Interest paid (150) (200) Tax paid (100) (1,300) Dividend paid (700) (600) Net cash flow from operations 1,250 2,800 Cash flow from investing activities: Proceeds from disposal of equipment 1,100 100 Purchase of property and equipment Net cash flow from investing (150) (3,700) 950 (3,600) Cash flow from financing activities Proceeds of issue of shares Increase/(decrease) in borrowing Net cash flow from financing activities Net decrease/increase in cash Opening cash Closing cash (1,000) 200 (1,000) 200 1,200 (600) 100 700 1,300 100 An extract from the Chairman's statement reads as follows: '2013 was another successful year, producing a positive cash flow which enabled us to pay off a substantial amount of borrowings, to invest in new fixed assets, and to increase the dividend for ordinary shareholders'. (Continued) a. Critically appraise the chairman's statement, outlining the main cash flow movements that happened in 2012 and 2013. (20 marks) b. Briefly explain why and how the following items are treated in the preparation of net cash flow from operating activities: (i) Decrease in payables (ii) Profit on sale of noncurrent assets (iii) Increase in bad debts provisions (2 marks) (4 marks) (4 marks) Total: 30 marks
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