QUESTION TWO $[25]$

Getit Ltd is retailer of office equipment and their accountant drafted the following incomplete Cash Flow Statement:

Cash Flow Statement for the year ended $30$ June $2023$

Rands

Cash flows from operating activities

$752000$

Profit before interest and tax$/$Operating profit

$5068000$

Adjustments to convert to cash from operations

Non$-$cash flow adjustments

$3088000$

Depreciation

$3000000$

$88000$

Loss on disposal of equipment

Profit before working capital changes

$8156000$

Working capital changes

$(2056000)$

Decrease in inventory

$132000$

$(1856000)$

$(332000)$

Increase in receivables

Decrease in payables

Cash generated from operations

$6100000$

Interest paid

$(1872000)$

Dividends paid

$?$

Income tax paid

$(1440000)$

Cash flows from investing activities

$(4192000)$

Non$-$current assets purchased

$(5288000)$

$1096000$

Proceeds from sale of equipment

Cash flows from financing activities

$4320000$

Proceeds from issue of ordinary shares

$1440000$

$2880000$

Increase in long$-$term borrowings

Net increase in cash and cash equivalents

$?$

Cash and cash equivalents at beginning of year

$720000$

Cash and cash equivalents at end of year

$?$

$2$

Required:

$2\mathrm{.}1$

Calculate the following:

$2\mathrm{.}1\mathrm{.}1$

Dividends paid $(2)$

$2\mathrm{.}1\mathrm{.}2$

Carrying value $($Book value$)$ of the equipment sold $(2)$

$2\mathrm{.}1\mathrm{.}3$

Cash and cash equivalents at the end of the year $(3)$

$2\mathrm{.}2$

Discuss two items from the above Cash Flow Statement that improve cash flow but does not

increase profit. $(2)$

$2\mathrm{.}3$

Analyse the reason that depreciation is added to operating profit in computing the cash flow from

operating activities. $(2)$

$2\mathrm{.}4$

There is a combination of a positive cash flow from operating activities of R$752000$ and a

negative cash flow from investing activities of R$4192000.$ Is this favourable? Discuss the

reasons for your answer. $(8)$

$2\mathrm{.}5$ Comment on the following:

$2\mathrm{.}5\mathrm{.}1$ Decrease in inventory $(3)$

$2\mathrm{.}5\mathrm{.}2$ Increase in receivables $(3)$