You are on page 1of 2

I am writing this report to comment on the financial performance and position of the company for the year ended

31 December 2012 based on the statement of cash flow that I prepared. Basically the cash flows of the company involve in three types of activities which are operating activities, investing activities and financing activities. Cash flow from operating activities As shown in the statement of cash flows, the profit before tax of the company is RM 15,000,000 which comes from the sales of the company. However, we still cannot justify the financial performance and position of the company based on just the profit before tax of the company. Other aspects will be considered later in this report in order to make an evaluation of financial performance and position of the company more accurately. After making some adjustments due to depreciation of assets (add RM 4,658,000), gain on disposal of non-current assets (minus RM 720,000) and interest paid (add RM 207,000) we get an amount of RM19, 145,000 which is the operating cash flow before working capital changes. There is a decrease in inventory which is RM 6,075,000 which means that some of the inventories were sold during the year. The increase in accounts receivable (RM 1,863,000) shows that our company is having credits of sales which the debtors havent paid us. While the increase in accounts payable (RM 3,178,000) shows that our company havent paid the money to the creditors and we are having the debt with the creditors. We are also having an increase in interest payable which is amounted to RM 20,000. After computing the above amount with the operating cash flow before working capital changes, we have the cash generated from operating activities of RM 265,550,000. After subtracting the tax paid and the interest paid which are RM 4,900,000 and RM 207,000 we get a net cash inflow of RM 22,258,000. Hence it is clear that our company has done a good job in maintaining the inventory and the debtors. Cash flow from investing activities During this year, we have purchased tangible asset which leads to an outflow of cash RM 24,340,000. And, we get cash of RM 2,694,000 from sale of tangible fixed assets. The cash outflow from the investing activities during the year has a total of RM 21,646,000. Cash flow from financing activities Our company had paid the dividend to the shareholders which had a grand total of RM1, 486,000. Besides that, we are having a long-term loan of RM 2,300,000. In this year our company had issued 1,000,000 ordinary shares of RM 1 each with the share premium of RM 869,000. Therefor the proceeds from the issuance of shares are RM 1,869,000. By subtracting it with dividend paid and long-term loan, the net cash outflow from financing activities is RM 1,917,000 Summary According to the statement of cash flow provided, there is a net decrease in cash and cash equivalent of RM 1,300,000. The cash and cash equivalent at the beginning of the year is RM 634,000 and hence the Cash and cash equivalent at the end of the year is decreased by RM 671,000.

Most of the cash was spent on investing activities which amounted to RM 21,646,000. The reason might be that our company are trying to expand our business currently. In addition, there is also a net cash outflow from financing activities of RM 1,917,000. The reason behind might be due to the inability of our company to handle the debts effectively and efficiently. In conclusion, our company is a mature enterprise which is trying to expand. However, we have a decrease in cash and cash equivalent at the end of the year. In order to turn it to a positive figure, some steps have to be carried out. For instance, we should plan well before using the cash so that we will not have a budget deficit. Moreover, it is advisable to urge the debtors to pay off their debts as soon as possible in order to meet the needs of the enterprise expansion.