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So I got this question in my text book revision guide:
THE FOLLOWING DETAILS WERE PROVIDED BY A COMPANY WHICH HAD PROFIT BEOFRE TAX OF £434,850. DEPRECIATION AND LOSS ON DISPOSAL IS £37400. FINANCE COSTS IS £35000 AND WAS CHARGED TO THE P AND L.
2016 2017
INVENTORY $145000 167000
TRADE RECIEVABLES 202,000 203000
PREPAYMENTS 27000 16000
TRADE PAYABLES 166000 212000
INTEREST PAYABLES 6000 28000What was the cash generated from operations?
Really confused as I thought since there is a decrease in trade payables it would £46000 to be added back as this is the difference between the two years. Also is interest payable not included in working out cash generated from operations. The answer to this question at the back of the book comes to £503,250. Could someone please explain how they got this. I understand how inventory, trade rec, prepayments, loss on disposal Is worked out. Confused on the rest.
Thanks
A decrease in payables is subtracted from the profit (because for payables to decrease they must have paid more during the year).
Interest paid is subtracted from cash generated from operations in order to arrive at the cash flow from operating activities, but the question asks for the cash generated from operations.
I do suggest that you watch my free lectures on this where it is all explained.
The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
How is trade payables worked out to be 16,000 to be deducted. Can you explain this please.
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