Determining the statements of cash flows

Reference no: EM13930358

Question 1

Following are statements of cash flows for Byron Ltd for the years ended 31 December:

	2014 $'000	2013 $'000
Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Interest paid Income taxes paid	360 (258) 1 (9) (24)	223 (180) - (5) (15)
Net cash flows from operating activities	70	36
Cash flows from investing activities Payments for property, plant and equipment Proceeds from sale of property, plant and equipment	(58) -	(11) 5
Net cash flows from investing activities	(58)	(6)
Cash flows from financing activities Proceeds from issue of shares Proceeds from borrowings Repayment of borrowings Distributions paid	13 28 (23) (21)	- 11 - (12)
Net cash flows from financing activities	(3)	(1)
Net increase (decrease) in cash held Cash at beginning of the reporting period	9 23	16 7
Cash at end of the reporting period	32	23

Byron Ltd's profit for 2013 and 2014 was $19 000 and $42 000 respectively.

Required:

(a) Describe what information and figures in these statements of cash flow employees of Byron Ltd would be interested in and examine. Explain your answer. Also discuss how employees would interpret the cash flows of Byron Ltd.

(b) Describe what information and figures in addition to your answer in (a) above, in these statements of cash flow an investor would be interested in and examine. (Please do not repeat your answer in (a) above). Explain your answer. Also discuss how an investor would interpret the cash flows of Byron Ltd.

(d) The net cash flows from investing activities for Byron Ltd for both 2013 and 2014 are negative. Discuss whether this is good or bad and whether you would normally expect this figure to be positive or negative.

(e) The net cash flows from financing activities for Byron Ltd for both 2013 and 2014 are negative. Discuss whether this is good or bad and whether you would normally expect this figure to be positive or negative.

(f) Which one of the three activities do you think is the most important cash activity for an entity? Justify your answer.

Question 2

Discuss how each of the three entities below normally trades (i.e. buy and sell). Based on these discussions, which one of the following three entities do you think would have the greatest proportion of their working capital held as cash (compared to the other components of their working capital), and which entity do you think would have the greatest proportion of their working capital held as accounts receivable (compared to the other components of their working capital)?

(a) Local convenience store

(b) Wholesaler of computers

Reference no: EM13930358

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