Prepare the cash flows of Worthwear Ltd

Worthwear Ltd is a quality producer and retailer of the latest fashion trends with manufacturing plants based in the Western Cape. The company produces the latest fashion trends and sells them to leading fashion retailers across South Africa. The following are extracts from Worthwear Ltd's annual financial statements for the June 2023 year-end: EQUITY AND LIABILITIES Equity attributable to owners Share capital (R1 ordinary shares) Retained earnings Other components of equity Total equity Non-current liabilities Long-term borrowings Deferred tax 6 \begin{tabular}{rr} 1250000 & 1000000 \\ 3270550 & 3104250 \\ 43350 & 24000 \\ \hline 4563900 & 4128250 \\ \hline \end{tabular} Current liabilities Trade and other payables Current portion of long-term borrowings Current tax payable \begin{tabular}{r|r} 1000000 & 1100000 \\ 3150 & \\ \hline 1003150 & 1100000 \\ \hline \end{tabular} Total liabilities Total equity and liabilities \begin{tabular}{rr} 204050 & 163000 \\ 120000 & 120000 \\ 48650 & \\ \hline 372700 & 283000 \\ \hline 1375850 & 1383000 \\ \hline 5939750 & 5511250 \\ \hline \end{tabular} Statement of Profit or Loss and Other Comprehensive Income of Worthwear Ltd for the financial year ended 30 June 2023 1. Pronertv. nlant. and onuinment 2. Intangible assets On the 28th of June 2023, Worthwear Lid patented their unique design of the asymmetric short-sleeve maxi dress, which has been a fast seller. 3. Trade and other receivables Included in the trade and other receivables of 2023 is a prepayment for the rental of a cutting machine amounting to R5 600 . There were no prepayments during the 2022 financial year. 5. Dividends paid During the current year, Worthwear Ltd declared and paid dividends of R65000 to its ordinary shareholders. An income tax rate of 28% and capital gains tax rate of 14% is assumed. 8. Other income Included in other income are the following items: - Dividends received Rand - Fair value adjustment - held for trading investments 6000 800 9. Profit before tax Included in profit before tax is the following items: - Depreciation Rand - Loss on scrapping of machinery 146250 10000 1.1) Prepare the Statement of Cash Flows of Worthwear Ltd, using the diroct method, for the year ended 30 June 2023 in accordance with International Financial Reporting Standards (IFRS). Show and reference all your calculations. Ignore comparative figures. Notes are not required. ( 35 marks) 1.2) At the Annual General Meeting, one of the shareholders commented that the cash flow statement reflects good financial decisions made by management. You are required to: - Identify one point from the statement of cash flow you prepared in 1.1 which supports the comment made by the shareholder, including the relevant figures. ( 2 marks) - Calculate the ratio of quality of earnings and provide a brief interpretation thereof. ( 3 marks) 1.3) Compute the working capital cycle of Worthwear Ltd as at 30 June 2022 and 30 June 2023 and briefly interpret the movement. Assume all sales to customers are made on credit. There were 365 days during the year. Assume the following figures for the 2022 financial year