1. a. Northern Rock plc was a leading British mortgage bank which ‘suddenly’ collapsed in 2007. The British Government has recently reopened the investigation into the circumstances surrounding the collapse of Northern Rock plc. You have been appointed as the Lead consultant and have been requested by the Chancellor to write a report clearly explaining some of the causes for the collapse of the bank. Your report is to be based on Consolidated Statement of Cash Flow for 2007only. You are not expected to have any previous knowledge about the collapsed bank.

[The notes to the statement are enclosed although some may not be important in your report].

2. b. ‘‘By their very nature, financial institutions differ from other types of business. Banks do not sell a product; they sell cash. To require a bank to provide a statement of cash flows is comparable to requiring a manufacturing company to provide a statement of inventory flows’’.

Critically analyse the above statement. Your analysis should indicate the relevance or otherwise of a statement of cash flow for a commercial bank.