You are Emeka. You have an eye for numbers. Abadat , a puppet-maker, is troubled and asks for your help. We had a good year last year. After-tax profits were 13 million. How then can our cash have fallen by 2 million? Can you take a look at last years accounts and tell me whats going on? I cant make head or tail of these accounts and people tell me youre quite a financial detective when it comes to balance sheets. He gives you the Statement of Financial Position of the company at 31 December 2014 and 2015. These are set out below. Abadat Company Statement of Financial Position at 31 December 2014 and 2015 (amounts in millions, except per-share figures) 2015 2014 Non-Current assets Buildings and equipment: Cost 64 58 Less: Accumulated depreciation -26 -25 Net book value 38 33 Investments 7 11 45 44 Current assets Inventory 19 18 Accounts receivable 16 13 Cash 3 5 38 36 TOTAL ASSETS 83 80 Shareholders equity Share capital (par value 5) 22 20 Share premium 5 5 Retained profits 23 18 50 43 Non-Current liabilities Pension and other provisions 11 10 Bonds payable, net of discount 0 9 11 19 Current liabilities Bank loan 8 2 Accounts payable and accrued liabilities 10 13 Corporate income taxes payable 4 3 22 18 SHAREHOLDERS EQUITY AND LIABILITIES 83 80 In addition, you uncover the following information about the company in 2015.(All amounts except per-share figures are in millions.) i. The company spends 21 on new buildings and equipment. It sells fixed assets with a net book value of 11. Depreciation charged in the year is 5. ii. It sells investments with a carrying amount of 4 and reports a gain on profit of 1.5. iii. It pays a cash dividend of 1.5 a share during the year. At the end of the year, it declares and distributes a 10% share dividend to shareholders. There are no other issues of shares in the year. iv. Profit before tax is 20. Income tax expense is 7. v. The bonds are retired at the start of the year and 9.5 is paid to bondholders. Required (a) Prepare a Cash Flow Statement for Abadat Company, showing the flows of cash in 2015 by activity. (b) Draft a brief memo to Abadat explaining the reason for the decline in cash in the year.