I am really battling to do this cash flow. Specifically the cash flow from extraordinary items and the cashflow from investment activities and financing activities. can you provide some guidance of where one must start with the balance sheets and income sheets

Finance and Accounting for Managers Week 3 Collaboration Group Work Question A Equity PLC has the following statements of financial position and income statements for the years ending 31st October 20X4 and 20X3. Equity plc Statements of Financial Position as at 31st October: 20X4 20X3 '000 '000 '000 '000 '000 '000 Cost Depn NBV Cost Depn NBV Land & Buildings 58,000 12,000 46,000 40,000 10,000 30,000 Plant & Machinery 32,500 14,500 18,000 30,000 12,000 18,000 90,500 26,500 64,000 70,000 22,000 48,000 Non current asssets Current Assets: Inventories 25,000 30,000 Accounts receivable 35,000 28,000 5,000 0 0 12,000 Current Asset Investment Bank 65,000 129,000 Total Assets 70,000 118,000 Capital: Ordinary Share Capital 35,000 30,000 Share Premium Account 10,000 8,000 2,000 0 23,000 20,000 Revaluation Account Retained Profits 70,000 58,000 Non Current Liabilities Loans 20,000 15,000 20,000 15,000 Current Liabilities Accounts payable 27,000 32,000 Proposed Dividends 6,600 11,000 Bank overdraft 3,000 0 Taxation 2,400 2,000 39,000 Total Equity and Liabilities 45,000 129,000 118,000 Equity Plc Income Statement for the year ending 31st October 20X4: '000 Sales Cost of Sales Gross Profit Other operating expenses 98,000 -48,000 50,000 -35,000 Profit before interest 15,000 Interest -1,200 Profit before taxation 13,800 Taxation -2,800 Profit after taxation 11,000 The following additional information is available: 1) 2) 3) Equity PLC recorded an increase in the value of its land of 2,000,000 during the year. The company has proposed dividends of 8,000,000 for the year. During the year, an item of machinery that originally cost 3,000,000 was sold for 500,000 - making a loss on disposal of 1,000,000. This item is included in the operating expenses. Required: a) Prepare a Statement of Cash Flows for the year ended 31st October 20X4 in accordance with IAS 7 (revised), using the indirect method. b) Prepare a Business Report commenting on the cash position of Equity PLC. Required length for Business Report = 1,500 words; please submit your Assignment to the Turnitin Link provided by End Wednesday, Day 7. Notes to assist you: 1. Remember, when you are using the indirect method, you need to start with the net profit before interest and tax. Can you see what figure this is? 2. In order to reconcile the profit to the net cash generated from operations, you need to add back non cash deductions such as depreciation for the year and you need to deduct non cash income, such as any gain on the disposal of assets. Can you work out the depreciation figure for the year? What does note 3 above tell you about the disposal of the machinery? Are there any other non cash adjustments that need including here? 3. The next step is to work out the adjustments for the changes in working capital items, namely in accounts receivables, accounts payables and inventories. Remember increases in current assets represent a cash outflow and should be deducted here. Decreases in current assets represent a cash inflow and should be added back. The opposite is true for current liabilities. 4. Once these adjustments are done, you have a figure that is the net cash flow from operating activities. 5. The next step is to work out the four main headings in the cash flow statement, namely net cash from operating activities, cash flows from investing activities, cash flows from financing activities, net cash movement during the year and finally this figure is reconciled back to the total cash and cash equivalents at the start and end of the year. 6. In order to work out the net cash from operating activities, you need to deduct any interest paid, income tax paid and dividends paid. Can you work out the cash paid for these items? Remember, it is not just the amounts taken from the financial statements; you need to work out the cash amount, by starting with the opening balance, adding what has been allocated during the year and deducting any closing balance. Refer to the example in the Test Your Knowledge questions relating to taxation for this Week. This principle that you have applied to taxation will also need to be applied to some of the other items such as dividends here and also other assets and liabilities later on. Deduct your taxation, interest and dividend figures to arrive at the net cash from operating activities. The next step is to calculate the cash flows from investing activities. This section deals with the movements in non-current assets. Reading note 3, can you work out the actual cash received from the sale of the machinery? Also, by looking at the opening and closing cost balances of the non-current assets on the SoFP and also taking into account the disposal in note 3, can you work out how much cash has actually been paid for non-current assets? This is using the same principle as explained in note 6 above relating to taxation, apart from you do not have a payment in the year in the income statement, but you do have some information in the notes relating to this. The sum of asset movements will give you the net cash movement from investing activities. 7. You can now work out the cash flow from financing activities. For this you need to work out the changes in share capital and premium and also any changes in long term loans. Has the company received cash or paid out cash in these two areas? You can ascertain this by looking at the SoFP for both years. Add all these up to give you the net cash flow from financing activities. 8. All that is left to do is add all your sub totals together; this will give you the total cash increase or decrease in the year. The final step is to reconcile this cash figure back to the movement in cash and cash equivalents for the year. Can you work out the total cash movement in the bank and also any cash equivalents the company may have? 9. Good luck! You may also find the following pro forma helpful: Using the Indirect Method '000 Cash flows from operating activities Net profit/loss before tax and interest x Adjustments for: Depreciation x Investment income x Interest expenses x - Profit/+ Loss on Sale of Fixed Asset x Operating profit before working capital changes x Increase/Decrease in trade and other receivables x Increase/Decrease in inventories x Increase/Decrease in trade payables x '000 Cash generated from operations x Interest paid x Income taxed paid x Dividends paid x Cash flow before extraordinary items x Net cash from operating activities x Cash flows from investment activities Acquisition of subsidiary x Payment to acquire tangible fixed assets x Receipt from sales of tangible fixed assets x Investment income received x Dividends received x Net cash used in investing activities x Cash flows from financing activities Proceeds from / (Payment) for share capital x Proceeds from / repayment of long-term borrowings x Payment of finance lease liabilities x Net cash flow from financing activities x Net increase/decrease in cash and cash equivalents x Cash and cash equivalents at the beginning of the period (Cash + Cash Equiv) x Cash and cash equivalents at the end of the period x (Cash + Cash Equiv)