Question 2: Accounting & Finance (30 marks)

1. In deriving the cash generated from operations, we add the depreciation expense for the period to the profit before taxation. Explain why. (10 marks)

B. The relevant information from the financial statements of ABC plc for last year is as follows:

	$m
Profit before taxation (after interest)	200
Depreciation charged in arriving at profit before taxation	40
Interest expense	5
At the beginning of the year
Inventories	14
Trade receivables	24
Trade payables	9
At the end of the year
Inventories	28
Trade receivables	20
Trade payables	15

The following further information is available about payments during last year:

	$m
Interest paid	1
Taxation paid	5
Dividends paid	6

Prepare a statement of cash flow for operating activities for ABC plc. (20 marks)