Session 6

Cashflow class activities

Using the information below, prepare a cashflow statement for the company Acme Corporation Income Statement, Year
Ended 31 December 2020 (Є thousands)

Revenue 23,598
Cost of goods sold 11,456
Gross profit 12,142
Salary and wage expense 4,123
Depreciation expense 1,052
Other operating expenses 3,577
Total operating expenses 8,752
Operating profit 3,390
Other revenues
Gain on sale of equipment 205
Interest expense (246) (41)
Income before tax 3,349
Income tax expense 1,139
Net income 2,210

Acme Corporation Comparative Balance Sheets, 31 December 2020 and 2019 (Є thousands)

2020 2019
Cash 1,011 1,163
Accounts receivable 1,012 957
Inventory 3,984 3,277
Prepaid expenses 155 178
Total current assets 6,162 5,575
Land 510 510
Buildings 3,680 3,680
Equipment* 8,798 8,555
Less: accumulated depreciation (3,443) (2,891)
Total long-term assets 9,545 9,854
Total assets 15,707 15,429

Accounts payable 3,588 3,325

Salary and wage payable 85 75
Interest payable 62 74
Income tax payable 55 50
Other accrued liabilities 1,126 1,104
Total current liabilities 4,916 4,628
Long-term debt 3,075 3,575
Common stock 3,750 4,350
Retained earnings 3,966 2,876
Total liabilities and equity 15,707 15,429

*During 2020, Acme purchased new equipment for a total cost of Є1,300. No items impacted retained earnings other than
net income and dividend. Calculate the cashflow from operation, investing and financing.

Required: Prepare a cashflow from operating activities, Investing activities and financing activities.
Exercise 2
Consider the financial statement of JJ&J below for the year ending 2022 and 2021.
STATEMENT OF COMPREHENSIVE INCOME 2022
Revenue 45,897
Cost of sales 22,500
Gross profit 23,397
Other income - Gain on sale of equipment 415
Operating expenses 17,250
Salary and wages 8,012
Depreciation 1,998
Other operating expenses 7,240
Operating profit 6,562
Interest expense 501
Profit before tax 6,061
Tax expense 1,744
Profit after tax 4,317

STATEMENT OF FINANCIAL POSITION

Non-current assets 2022 2021
Property, plant and equipment* 19,493 19,735
Land and buildings 8,523 8523
Equipment 17,968 17235
Accumulated depreciation - Equipment -6,998 -6023

Current assets 12,225 11,139

Inventory 7,884 6655
Accounts receivable 2,024 1735
Cash and cash equivalents 2,003 2351
Prepaid expenses 314 398

TOTAL ASSETS 31,718 30,874

Equity 15,738 14,394

Share capital 7,500 8700
Retained earnings 8,238 5694

Liabilities
Non-current liabilities
Borrowings 6,150 7020

Current liabilities 9,830 9,460

Accounts payable 9,598 9211
Accrued interest 120 149
Tax payable 112 100

TOTAL EQUITY AND LIABILITIES 31,718 30,874

*During 2022 JJ&J Ltd purchased new equipment for a total cost of €2 600. No items impacted retained
earnings other than net profit and dividends.
Required: Prepare a cashflow from operating activities, Investing activities and financing activities
Exercise 3
Use the information in exercise 1 and 2 above (ACME and JJ&J) and calculate the following cashflow ratios.
a. Performance ratios
b. Coverage ratios
Do a comparative analysis (Cashflow ratio analysis)

CASHFLOW RATIOS