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Income Statement for Years Ended $30$ June

$2014($m$)2015($m$)$

Revenue $1,2302,280$

Operating expenses $(722)(1,618)$

Depreciation $(270)(320)$

Operating profit $238342$

Interest payable $-(27)$

Profit before taxation $238315$

Taxation $(110)(140)$

Profit for the year $128175$

Statements of Financial Position as at $30$ June

$2014($m$)2015($m$)$

ASSETS

Non$-$current assets

Property, plant and equipment $($at carrying amount$)$

Land and buildings $1,5001,900$

Plant and machinery $810740$

Current assets

Inventories $275450$

Trade receivables $100250$

Bank $-118$

Total assets $2,6853,458$

EQUITY AND LIABILITIES

$2014($m$)2015($m$)$

Equity

Share capital $($fully paid $1$ shares$)1,4001,600$

Share premium account $200300$

Retained earnings $828958$

Non$-$current liabilities

Borrowings $9\%$ loan notes $($repayable $2019)-300$

Current liabilities

Borrowings $($all bank overdraft$)32-$

Trade payables $170230$

Taxation $5570$

Total equity and liabilities $2,6853,458$

Note: There were no disposals of non$-$current assets in either year. Dividends were paid in $2014$ and $2015$ of $40$ million and $45$ million respectively.

One of the major problems that students seem to face $($as evidenced by performance in the assessment over the last several terms$)$ is understanding how the main financial statements $($Profit and Loss Statement, Statement of Cash Flow, Balance Sheet, and Statement of Owner$$s Equity$)$ should relate to each other. This is one of the very basic requirements for understanding financial statements.

To recap, one of the statements $($the Balance Sheet$)$ is a snapshot at a point in time, while the other three $($Profit and Loss Statement, Statement of Cash Flow, and Statement of Owner$$s Equity$)$ reflect events taking place during the period of time between Balance Sheets. For example, a Profit and Loss Statement for the year $202($X$)$ would relate to financial events in the twelve months between $202($X$-1)$ and $202($X$).$

This Unit $2$ exercise has been designed to help students to understand the detail through a logical approach to the analysis, and you should follow the instructions carefully in the given order:

$1.$ Start by developing the Statement of Owner$$s Equity for the year $2015$ using the following format $($if you do not understand what some of the entries entail, then research the topics in the textbook or in other sources$).$ Not all the elements will necessarily apply to the example:

All values in $$m Share capital Share premium Revaluation reserve Translation reserve Retained Earnings Total

Opening Balance

Issue of shares

Dividends

Total comprehensive income for the year

Closing Balance

$2.$ Then develop the net cash flows from operating activities using the following framework:

Net cash flows from Operating Activities Explanation $($if needed$)$ Impact Total in $$m

Profit before tax

Depreciation expense

Interest expense

Increase $(-)$ or decrease $(+)$ in inventories

Increase $(-)$ or decrease $(+)$ in trade $($and other$)$ receivables

Increase $(+)$ or decrease $(-)$ in trade $($and other$)$ payables

Interest paid

Taxation paid

Net cash flows from operating activities

$3.$ Also, develop the net cash flows from investing and financing activities using the following framework:

Net cash flows from Investing Activities Explanation $($if needed$)$ Impact Total in $$m

Payments to acquire non$-$current assets

Interest received

Net cash flows from Investing Activities

Net cash flows from Financing Activities Explanation $($if needed$)$ Impact Total in $$m

Issue of loan notes

Repayment of bank borrowings

Issue of shares

Payment of Dividends

Net cash flows from Financing Activities

$4.$ Based on the above $($and other details if necessary$)$ prepare an overall Cash Flow Statement $($using the template on the following page$)$ and, if appropriate, add brief notes in the relevant rows to explain how the statement correlates with the Profit and Loss Statement, Statement of Cash Flow, Balance Sheet, or Statement of Owner$$s Equity and, where necessary, how the other three statements correlate with each other.

$5.$ Please read this section carefully and be sure to follow the instructions carefully. When you have completed your analysis, you should make a screenshot of the single page which incorporates your completed $$CASH FLOW STATEMENT$$ FOR THE YEAR $2015$ table $($i$.$e$.$ the following page$).$ Make sure that your screenshot includes the entire table and that it does not spread over more than one page. Save the screenshot in jpg$,$ jpeg or png format only. Then press the Upload button for the assignment and upload your single jpg$,$ jpeg or png file to the $$Attachments$$ section. After uploading you should now see that a new Forum discussion thread for this assignment has opened. If you are the first to upload the submission you will only see your own posting, but if you are not the first you will also see the postings from the other studen

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