Question 3 For a business to continue in operation, cash flow seems to be one of the most important ingredient. Hence, the preparation of cash flow statement came into existence. (a) Critically discuss why a cash-flow statement is considered a necessary component of the primary financial statements and what information does it intend to convey? (b) Using the following balance sheets, summary profit and loss account and other financial information for Kandimel plc, answer the following questions: (i) Discuss and explain the cash funds that were generated from the companys operating activities? (ii) Briefly explain how much cash was raised from outside sources, what could possibly be the sources, and why this was needed? KANDIMEL PLC Summary profit and loss account for the year ended 28 February 2021 in $000,000 $ Sales 625 Depreciation 9 Other costs 551 560 Operating profit 65 Interest all paid in the year 5 Profit before taxation 60 Taxation at 30% 18 Profit after taxation 42 Dividends Final proposed dividend 8 Profit retained 34 Balance sheets at 28 February: 2021 2020 $ $ $ Fixed assets: (see note below) Tangible assets 150 120 Investments 75 225 70 190 Current assets: Stocks 39 28 Debtors 24 18 63 46 Creditors amounts falling due within 1 year Trade creditors 5 10 Taxation 18 14 Final dividend proposed and payable 8 6 Bank overdraft 22 18 Net current assets/(liabilities) 53 10 48 (2) Total assets less current liabilities 235 188 Creditors amounts falling due after more than 1 year 10% loan stock 20 27 Capital and reserves 215 161 Called up share capital 90 70 Profit and loss account 125 91 Note: 215 161 Fixed assets Tangible assets Cost 189 159 Accumulated depreciation (39) (39) 150 120 During the year tangible assets costing $19M with a net book value of $10M were sold for $12M.