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The directors of Alexay plc are concerned about the substantial increase in the company's bank overdraft in 2019. The summarised balance sheets of the company
The directors of Alexay plc are concerned about the substantial increase in the company's bank overdraft in 2019. The summarised balance sheets of the company at 31 December were: 2018 2019 000 000 Non-current assets (net of depreciation) 1,315 2,090 Current assets Stock at cost 670 Trade debtors 675 610 1,280 Total assets 1.990 3.370 Current liabilities Bank overdraft Trade creditors Corporation tax Long-term liabilities Share capital and reserves Issued share capital (1 shares) Share premium Revaluation reserve for land Profit and loss account Total liabilities and equity 380 500 465 1.098 1.990 1.965 3.370 The summarised income statement for Alexay plc for the year ended 31" December 2019 was: 000 Sales 3,900 Cost of sales 2,600 Gross profit 1,300 Administration expenses Depreciation Interest expenses Net profit before corporation tax Corporation tax Net profit after corporation tax Dividends Retained profit for the year No fixed assets were disposed of during the year ended 31 December 2019. Required: (a) Calculate the net cash flow from operating activities for 2019. (b) Prepare a cash flow statement in good style for 2019. (c) Calculate and comment on the following for 2019: (i) current ratio (ii) gearing ratio (iii) interest cover (d) Reply to the following queries put to you by one of the directors of Alexay ple: "Can you please explain to me how we have a healthy profit yet our bank overdraft has reached a record level? Surely there must be something wrong with the profit calculations, isn't there
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