Machiq Limited (see previous case studies) was formed on 1 July 2014 and has been
making increasing profits. By 30 June 2016 it reports the following summarised income
statements and statements of financial position:
Income statements for the year ended 30 June
| 2016 £ |
2015 £ |
|
| Gross profit | 176,400 | 133,260 |
| Less Expenses (includes depreciation £5,060 in 2016) | (58,600) | (39,460) |
| Operating profit for the year | 117,800 | 93,800 |
| Less Interest payable | (1,800) | (1,800) |
| Profit for the year before taxation | 116,000 | 92,000 |
| Less Taxation | (26,950) | (18,400) |
| Profit for the year | 89,050 | 73,600 |
Statement of financial position as at 30 June
| 2016 | 2015 | |||
| £ | £ | £ | £ | |
| Non-current assets (depreciated value) | 165,980 | 74,040 | ||
| Current assets: | ||||
| Inventory | 32,650 | 17,370 | ||
| Receivables | 30,950 | 39,560 | ||
| Bank | – | 6,240 | ||
| 63,600 | 63,170 | |||
| Less Current liabilities | ||||
| Payables | 46,080 | 41,710 | ||
| Taxation | 26,950 | 18,400 | ||
| Bank overdraft | 2,400 | – | ||
| Net current assets/(liabilities) | (75,430) | (60,110) | ||
| Total net assets | (11,830) | 3,060 | ||
| Equity | 154,1450 | 77,100 | ||
| Share capital | ||||
| Share premium account | 24,000 | 14,000 | ||
| Retained earnings | 31,000 | 21,000 | ||
| Total equity | 99,150 | 42,100 | ||
| 154,150 | 77,100 | |||
Reconciliation of movements in equity
| Share capital |
Share premium |
Retained earnings |
Total | 2014/5 | |
| At 1 July 2015 | 14,000 | 21,000 | 42,100 | 77,100 | 35,000 |
| Issue of shares | 10,000 | 10,000 | 20,000 | – | |
| Profit for the year | 89,050 | 89,050 | 73,600 | ||
| Equity dividends paid | (32,000) | (32,000) | (31,500) | ||
| At 30 June 2016 | 24,000 | 31,000 | 99,150 | 154,150 | 77,100 |
The changes in the share capital and share premium account were due to a sale of shares
to Trixie Richardson, who had recently left Kazam Limited after 10 years’ service as
chief accountant. Trixie was appointed managing director of Machiq Limited on 10
April 2016. During the year ended 30 June 2016, Machiq Limited bought two Mercedes
cars for £48,500 each for Marvin’s and Chiquita’s use. No assets were sold in the year.
Trixie is concerned that, whilst the company seems to be profitable, its cash flow
appears to be poor.
Required
(a) Prepare a cash flow statement for the year ended 30 June 2016.
(b) Do you agree with Trixie’s opinion of the cash flow? What have been the key cash
inflows and outflows in the year?
