Comment on Statement of Cash Flows

Net Cash from operating activities (version1_T2 Q1)

1. Net cash from operating activities vs. profit for the year

• Net cash from operating activities (i.e. $3820) was strong, much more than the profit for the year figure (i.e. the loss for the year $-4410)

睇is, profit after taxation – proposed dividend 之後個數

1. Net working capital change = (inventories + account receivable-account payable)

• As we can see that although there has been a positive change in net working capital of $? (i.e. $600 Inventories+$950Account receivable-$700 Account payable and the cash flow from operating activities are positive of $?
• This was due to the addition of non-cash items and other adjustment resulting in a positive cash from operating activities.

1. Lenders & interest cover

• Lenders in xx co. concerned with interest cover  could see that the cash flow available to meet interest charges and taxation in the current year has been favorably affected by the positive number of operating cash flows
• The interest cover (i.e. the profit before interest and tax divided by the interest) as disclosed in the balance sheet was negative ($-1414000/500000=-2.82 times)
• Thus the net profit before interest and tax was not enough to cover the interest payment.
• However, the position as disclosed in the statement of cash flow was stronger.
• The interest cover using the cash flows from operating activities was 7.64 times (3820,000/500,000),

1. Going concern & cash debt coverage

• In addition to interest cover, lenders want to be satisfied that their loan will be repaid.
• Failure to do so could lead to a going concern problem for the company.
• The cash debt coverage ratio [(Net cash from operating activities-dividends)/total debt] was very low.
  [($3,820,000-2,100,000/5,000,000)=0.344 times
• It can be seen that its debt load is higher than its operating cash flows, giving it a ratio of less than one. And the ratio is considered low, (being below 50%).
• It would indicate the company has too much debts.
• The less the ratio, the worse a company can weather rough economic conditions

Net Cash from operating activities (version2_T2 Q2)

1. Net cash from operating activities vs. profit for the year

• As we can see, net cash from operating activities (i.e. $5601) was strong, much more than the profit for the year figure.(i.e. the profit for the year $1436).

1. Net working capital change = (inventories + account receivable-account payable)

• This was due to the positive change in working capital ($500,000 stock + $700,000 debtors -$100,000 creditors) and the addition of non-cash item and other adjustments resulting in a positive cash flow from operating activities.(i.e.5601)

1. Lenders & interest cover

• Lenders in xx co. concerned with interest cover could see that the cash flow available to meet interest charger and taxation in the current year has been favorably affected by the positive number of operating cash flows
• The interest cover (i.e. the profit before interest and tax divided by the interest) as disclosed in the balance sheet was very good ($3576000/24000=149 times)
• Thus the net profit before interest and tax was enough to cover the interest payment.
• However, the position as disclosed in the statement of cash flow was stronger.
• The interest cover using the cash flows from operating activities was 233 times (5601000/24000)

4. Going concern & cash debt coverage

• In addition to interest cover, lenders want to be satisfied that their loan will be repaid.
• Failure to do so could lead to a going concern problem for the company.
• The cash debt coverage ratio [(Net cash from operating activities-dividends)/total debt] was [($5601000-1100000/1700000) =2.65times
• →It can be seen that its operating cash flows is higher than its debt load, giving it a ratio of more than one. And the ratio is considered low, (being above 200%).
• It would indicate the company has ample capacity to cover its’ debt expenses with its operating       cash flow

Net Cash from operating activities (version3_Ex 2013)

1. Net cash from operating activities vs. profit for the year

• Net cash from operating activities (i.e. $1220) was quite similar to the profit for the year (i.e. $770)
  睇is, profit after taxation – proposed dividend 之後個數

1. Net working capital change = (inventories + account receivable-account payable)

• As we can see that there has been a negative change in net working capital of $700(i.e. $-450 Inventories+$300 Account receivable-$550 Account payable and the cash flow from operating activities are positive of $1220
• This was due to the addition of non-cash items and other adjustment resulting in a positive cash from operating activities.

1. Lenders & interest cover

• Lenders in xx co. concerned with interest cover  could see that the cash flow available to meet interest charges and taxation in the current year has been favorably affected by the positive number of operating cash flows
• The interest cover (i.e. the profit before interest and tax divided by the interest) as disclosed in the balance sheet was negative ($1400/300=4.67 times)
• Thus the net profit before interest and tax was sufficiently cover the interest payment.
• However, the position as disclosed in the statement of cash flow was weaker.
• The interest cover using the cash flows from operating activities was 4.06 times (1220/300),

1. Going concern & cash debt coverage

• In addition to interest cover, lenders want to be satisfied that their loan will be repaid.
• Failure to do so could lead to a going concern problem for the company.
• The cash debt coverage ratio [(Net cash from operating activities-dividends)/total debt] was very low.
  [($1220-170/1000)]=1.05 times
• It can be seen that its operating cash flows is higher than its debt load, giving it a ratio of more than one. And the ratio is considered high, (being above 100%).
• It would indicate the company has ample capacity to cover its’ debt expenses with its operating cash flow

Net Cash from operating activities (version4_Ex 2014)

1. Net cash from operating activities vs. profit for the year

• Net cash from operating activities (i.e. $1411) was quite similar to the profit for the year (i.e. $768)
  睇is, profit after taxation – proposed dividend 之後個數

1. Net working capital change = (inventories + account receivable-account payable)

• As we can see that there has been a negative change in net working capital of $39(i.e. $600 Inventories+$-200Account receivable-$439 Account payable and the cash flow from operating activities are positive of $1411
• This was due to the addition of non-cash items and other adjustment resulting in a positive cash from operating activities.

1. Lenders & interest cover

• Lenders in xx co. concerned with interest cover  could see that the cash flow available to meet interest charges and taxation in the current year has been favorably affected by the positive number of operating cash flows
• The interest cover (i.e. the profit before interest and tax divided by the interest) as disclosed in the balance sheet was negative ($1160/200= 5.8 times)
• Thus the net profit before interest and tax was sufficiently cover the interest payment.
• However, the position as disclosed in the statement of cash flow was a bit stronger.
• The interest cover using the cash flows from operating activities was 7.06 times (1411/200)

1. Going concern & cash debt coverage

• In addition to interest cover, lenders want to be satisfied that their loan will be repaid.
• Failure to do so could lead to a going concern problem for the company.
• The cash debt coverage ratio [(Net cash from operating activities-dividends)/total debt] was very low.
  [($1411-236/1700)]=0.70 times
• It can be seen that its debt load is higher than its operating cash flows, giving it a ratio of less than one. And the ratio is considered low, (being below 10%).
• It would indicate the company has too much debts.
• The less the ratio, the worse a company can weather rough economic conditions

Net cash from investing activities (version1_T2 Q1)

• There were net outflows of cash for investing activities (i.e. 11320), but this would not be unusual.
• Many items of property, plant and equipment have limited lived and need to be replaced with new ones
• The expenditure during the year was not out of line with the depreciation expense for the year
  
  Net cash from investing activities (version2_T2 Q2)
• Although net cash from investing activities were