QUESTION 1		(20 Marks)
INFORMATION
NUWARE LIMITED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2019
Cash flows from operating activities	R 2 540 000
Profit before interest and tax	7 700 000
Non-cash flow adjustments	700 000
Add: Depreciation	700 000
Profit before working capital changes	8 400 000
Working capital changes	690 000
Decrease in inventory	180 000
Decrease in receivables	310 000
Increase in payables	200 000
Cash generated from operations	9 090 000
Interest paid	(150 000)
Dividends paid	(4 900 000)
Company tax paid	(1 500 000)
Cash flow from investing activities	(4 200 000)
Land, buildings and equipment purchased	(4 200 000)
Cash flow from financing activities	1 100 000
Increase in long-term borrowings	1 100 000
Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year	? ?
Cash and cash equivalents at end of year	?

REQUIRED:

1. Why was depreciation included in computing the cash flow from operating activities? (2 marks)

2. Calculate the cash balance on 31 December 2019 if there was a bank overdraft of R460 000 on 31 December 2020.

(2 marks)

3. Based on the cash flow information above, how does the company appear to be performing? Explain by referring to at least five items in the cash flow statement. (10 marks)

4. Long term loans were increased during 2020. Was this the most appropriate way of financing the purchase of assets? (3 marks)

5. What cash receipts increase cash but not profits? (3 marks)