The statements of financial position, cash flows, income and movements of non-current assets of Dragon plc for the year ended 30 September 20X6 are set out below:

(i) Statement of financial position

(ii) Statement of income (extract) for the years ended 30 September 20X6

(iii) Statement of cash flows

(iv) Tangible non-current assets (or PPE) the movements in the year were as follows:

You are also provided with the following information:

(i) There was a debenture issue on 1 October 20X5 with interest payable on 30 September each year.

(ii) An interim dividend of £70,000 was paid on 1 July 20X6.

(iii) The short-term investment was sold for £59,000 on 1 October 20X5.

(iv) Business activity increased significantly to meet increased consumer demand.

Required:

(a) Prepare a Reconciliation of operating profit to net cash inflow from operating activities.

(b) Discuss the financial developments at Dragon plc during the financial year ended 30 September 20X6 with particular regard to its financial position at the year end and prospects for the following financial year – supported by appropriate financialratios.

Transcribed Image Text:

20X5 20X6 £000 £000 £000 £000 Tangible non-current assets Freehold land and buildings, at cost Plant and equipment, at net book value 1,160 1,700 1,200 700 1,900 2,860 Current assets Inventory Trade receivables 715 1,020 590 826 Short-term investments 52 Cash at bank and in hand 15 47 1,893 1,372 Current liabilities Trade payables Taxation payable Dividends payable 520 940 130 45 90 105 740 1,090 Net current assets 632 803 3,663 2,532 Long-term liability and provisions 8% debentures, 20X9 1,500 500 Provisions for deferred tax 00 180 1,983 1,932 Capital and reser ves Ordinary shares of £l each Share premium account Retained earnings 1,400 1,400 250 250 282 333 1,932 1,983