QUESTION FOUR [25] The following cash flow statement of Amo Limited is presented to you: Amo Limited Cash flow statement for the year ended 31 June 2020 R (255 000) (280 000) Cash flow from operating activities Operating loss Adjustments Depreciation Profit before working capital changes Working capital changes Increase in inventory Increase in receivables 100 000 ( 180 000) 55 000 (200 000) (175 000) Increase/decrease in payables Dividends paid Interest paid ? (60 000) (70 000) Cash flow from investing activities Acquisition of plant and equipment (300 000) (300 000) Cash flow from financing activities Increase in long term loan (25%) Net decrease/increase in cash Cash balance (1 July 2019) Cash balance (30 June 2020) 450 000 450 000 ? ? (160 000) Required: 4.1 Explain why depreciation was included in computing the cash flow from operating activities. (2) 4.2 Calculate the following: 4.2.1 net increase/decrease in payables (3) 4.2.2 net increase/decrease in cash for the year (3) 4.2.3 cash balance on 1 July 2019 (3) 4.3 Based on the cash flow information provided above, discuss Amo Limited's performance. Refer to at least five (5) items appearing on the cash flow statement within your discussion. (5) 4.4 The long term loan was increased during the financial year. Explain whether or not this was a wise decision clearly stating your reasons. (4) 4.5 Comment on the dividend policy of the company. (3) 4.6 Suggest two ways in which the company can improve its liquidity. (2)