Solution 16.7

Overall cash flow	O/Bal	C/Bal	NCF
Bank	120	0	(120)
Short-term investments	12	25	13
bank loans and overdrafts	0	(100)	(100)
	132	(75)	(207)

Statement of Cash Flow

Cash flows from operating activities	€(‘000)	€(‘000)	€(000)
Operating profit		1,016
Add:
Depreciation for year	800
profit on sale of fixed assets	(50)
Increase in provisions	0	750
Changes in Working Capital
Add: Increase in current assets – receivable	(6)
Decrease in current assets - inventories	23
Decrease in current liabilities - payable	(60)
Increase in current assets - prepayments	(2)
Increase in current liabilities – accruals	3	(42)
Cash generated from operations		1,724
Finance Interest Paid	(416)
Taxation Paid	(470)	(886)
Net cash generated by operating activities		838	838

Cash flows from investing activities
Proceeds on disposal of fixed assets		350
Payments to acquire fixed assets		(2,493)
Net cash generated from investing activities		(2,143)	(2,143)

Cash flows from financing activities (note 5)
Proceeds from borrowings		119
Redemption of borrowings		(200)
Issue of shares		1,679
Dividends Paid		(500)
Net cash generated from financing activities		1,098	1,098
OVERALL CASHFLOW			(207)

The following points should be made

Overall negative cash flow of €207,000 with the company going from having a surplus of cash at the beginning of the year to a deficit of €75,000 at the end of the year.

Identify main sources of cash

Operating activities – The cash generated from operations was €1,724 compared to the operating profit figure of €1,016. Thus the operating cash to operating profit ratio amounts to 170% mainly due to depreciation charges in the income statement. This needs to be compared to previous years to assess the trend.

Net cash generated from operating activities accounted for 28%(838/2986) of the total cash generated

3 Sale of non-current assets

4 Issue of debentures

5 bank overdraft

Identify main uses of cash

Dividend payments
Investment in non-current assets: Assets increased by 8.6%(25583/23540-1)
Redemption of bank loans
Purchase of s/t investments.

Overall 28% of the company's cash generated was financed through operating activities. The main item of expenditure was the investment in fixed assets which has partly financed through a share issue and cash generated from operating activities.