Fast Photo Ltd

Cash Flow Statement for the year ended 31 December 2005

Cash flows from operating activities € €

Profit before interest and tax 11,855

Adjustments for:
Depreciation 2,771
Profit on sale of equipment -2,796

Operating profit before working capital changes 11,830

Increase in trade and other receivables -4,768

Increase in inventories -3,620
Increase in trade payables 5,627
Increase in accruals 420

Cash generated from operations 9,489

Interest paid -859

Tax paid -1,362

Net cash from operating activities 7,268

Cash flows from investing activities

Sale of property, plant and equipment 7,535
Purchase of property, plant and equipment -9,054

Net cash from investing activities -1,519

Cash flows from financing activities

Proceeds from issue of share capital 32
Share Premium * 319
Dividends paid -1,966
Receipt from long term loan 2,153

Net cash from financing activities 538

Increase in cash and cash equivalents 6,287

Cash and cash equivalents at beginning of period 14,648

Cash and cash equivalents at end of period 20,935

Note 2004 2005 Change

Cash at bank 3,648 5,935 2,287
Current asset investments 11,000 15,000 4,000
Cash and cash equivalents 14,648 20,935 6,287

* Mistake in question - share premium @ 31/12/04 should be €6,435 instead of €6,432

Movement in trade receivables
Balance at end of 2004 27,399
Balance at end of 2005 32,167
Increase 4,768
=> cash outflow

Movement in inventories
Balance at end of 2004 19,935
Balance at end of 2005 23,555
Increase 3,620
=> cash outflow

Movement in trade payables

Balance at end of 2004 33,461
Balance at end of 2005 39,088
Increase 5,627
=> cash inflow

Movement in accruals
Balance at end of 2004 4,115
Balance at end of 2005 4,535
Increase 420
=> cash inflow

Tax paid for the year

Opening tax liability at start of the year 4,695

Tax charge for 2005 1,980
6,675
Tax paid 1,362
Tax liability at 31 December 2005 5,313

Share capital and share premium

2005 2004 Increase
Share capital 3,954 3,922 32
Share premium 6,754 6,435 319
351

Total cash received from issue of shares 351

Solution shows this split between share capital (32) and share premium (319)
but showing one total figure is also acceptable

Disposal of plant and machinery

Cost of disposed machinery 15,000

Net book value at time of disposal 4,739
Accumulated depreciation on disposed asset 10,261

To find proceeds of disposal, look at NBV and profit or loss on disposal

Net book value 4,739

Gain made on disposal 2,796
Therefore we received a total of 7,535
Plant and machinery - reconcile opening and closing balances

Cost
Opening cost at start of the year 50,946
Less: cost of asset disposed of - 15,000
Cost of remaining plant and machinery 35,946

Cost of plant and machinery at end of the year 45,000

Difference must be additions during the year 9,054

Accumulated Depreciation
Acc Dep on P+M at start of the year 18,463
Less: Acc Dep on asset disposed of - 10,261
Accumulated Depreciation of remaining P+M 8,202

Accumulated Depreciation at end of the year 10,973

Difference must be this year's depreciation charge 2,771

Movement in bank loan balance

Balance at end of 2004 12,938
Balance at end of 2005 15,091
Increase 2,153
=> cash inflow