In the following example we will drawn up a cash flow summary and carry out a cash flow analysis for each stage in that summary:
Let us consider Jasmine. She owns a company by the name of Jasmine and Co. The company’s balance sheets for the years 2009 and 2010 and income statement for 2010 are given below:
|
Jasmine and Co. |
||
|
Balance sheets as at 31 Dec. |
||
|
2009 |
2010 |
|
|
Non-current assets: |
$ |
$ |
|
Fixed Assets (Net) |
25,000 |
33,000 |
|
Other Non-current assets |
10,000 |
8,000 |
|
Total non-current assets |
35,000 |
41,000 |
|
Current assets: |
||
|
Cash |
15,000 |
16,000 |
|
Inventory |
8,000 |
7,500 |
|
Accounts receivables |
7,000 |
7,300 |
|
Prepaid expenses |
2,000 |
1,900 |
|
Total current assets |
32,000 |
32,700 |
|
Total assets |
67,000 |
73,700 |
|
Financed by: |
||
|
Current liabilities: |
||
|
Accounts payables |
5,500 |
7,000 |
|
Accrued expenses |
1,500 |
1,700 |
|
Tax payable |
2,000 |
1,800 |
|
Total current liabilities |
18,000 |
18,500 |
|
Long term liabilities: |
||
|
Long term debt |
29,000 |
23,000 |
|
Total long term liabilities |
20,000 |
15,000 |
|
Equity |
||
|
Ordinary share capital |
14,000 |
14,000 |
|
5% Preference share capital |
8,000 |
10,000 |
|
Retained earnings |
7,000 |
16,200 |
|
67,000 |
73,700 |
|
Figure 2: Balance sheet for Jasmine & Co.
|
Jasmine and Co. |
||
|
Income statements for the years ended 31 Dec. |
||
|
2009 |
2010 |
|
|
$ |
$ |
|
|
Sales |
28,000 |
37,300 |
|
Less: Cost of inventory sold |
-10,400 |
-15,400 |
|
Gross profit |
17,600 |
21,900 |
|
Less: expenses |
||
|
Rent |
-3,500 |
-3,500 |
|
Advertising |
-800 |
-1,200 |
|
Depreciation |
-1,700 |
-2,000 |
|
Electricity |
-750 |
-800 |
|
Salaries |
-2,800 |
-3,000 |
|
Operating profit |
8,050 |
11,400 |
|
less: Interest expense |
-600 |
-600 |
|
Profit before tax |
7,450 |
10,800 |
|
Tax |
-1,500 |
-1,600 |
|
Net profit after tax |
5,950 |
9,200 |
Figure 3: Income Statement for Jasmine & Co.
Using the balance sheet and income statement we will now construct the cash flow summary of Jasmine & Co. We will undertake the construction process as well as conduct a cash flow analysis in a step-by-step manner considering each of the eight segments in turn. We will merge all the pieces together at the end.
Comments are closed.