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A business’s bank bal increased by 750 000 £ during its last financial yr.
During same period it issued shares of £ 1 million & repaid debenture of £ 750000.
It purchased fixed assets for £ 200000 & charged depreciation of £100000. Working capital (other than bank bal) increased by £ 575 000.
Its profit for the year was ?Pls explain the required working. Gettting a bit confused with the issue of shares and debenture part..
Thanks.This is testing on Statement of Cash Flows (and I assume that you have watched the free lectures on this – the lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
The cash flow from financing activities is an inflow of $250,000 (an inflow of $1M from the issue of shares, and an outflow of $750,000 to repay the debenture).
The cash flow from investing activities is an outflow of $200,000.
You know what the overall increase in cash is ($750,000) so now you can calculate the cash flow from operating activities as the missing figure.
The cash flow from operating activities is the profit plus depreciation less increase in working capital, so you can work backwards from the figure you have calculated for the cash flow from operating activities to get the profit.
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