Advanced Financial Analysis, Philippe Giraudon, CIIA November 2020

LIMO Cash Flows and Financial Statements, and ENVIRO Financial Statements and Info

I] You are financial analyst at Morton & Barns and want to show a clear Cash Flow Statement of LIMO:

1) What are the main sections/categories of a cash flow statement?

Briefly describe the content of each of these sections.

2) For each of these items, indicate to which of the cash flow statement sections they correspond:

• Dividend received by Limo from Limo Subsidiary

• Sale of products and services

• Acquisition of a new asset

• Depreciation of the newly bought asset

• Sale of a production facility

• Acquisition of inventories (30 day credit provided by the supplier)

• Acquisition of another company (50% with shares / 50% with cash)

• Payment of employees

3) What are the two methods used to calculate cash flow from operating activities? Describe them briefly

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©Philippe Giraudon
Advanced Financial Analysis, Philippe Giraudon, CIIA November 2020

II] Your Company CFO analyses ENVIRO Company below to envisage a potential acquisition of ENVIRO; what
key element(s) of ENVIRO do you think wise to highlight to him based on the information below?

(in thousands / ‘000)

Balance Sheet 31/12/Ne 31/12/N-1 31/12/N 31/12/N-1

Intangible Assets 67 000 62 000 SH’s Fund 105 000 105 000
Goodwill 61 000 56 000
Patents 6 000 6 000
Tangible Assets 10 000 9 500 Cumulated earnings -11 000 -7 500
Financial Assets 0 0 Net result 22 300 -3 500
Inventories 300 1 200 Financial Debt 7 000 6 500
Accounts receivables 52 000 31 800 Accounts payable 31 000 22 500
Cash & equivalents 42 000 29 800 Other debts 17 000 11 300
Total Assets 171 300 134 300 Total Liabilities 171 300 134 300
(Note : Ne = Year N expected figures)

P&L 31/12/Ne
Sales 311 500
EBITDA 14 532
EBIT 5 113
+ Financial result 995
+ Exceptional result 16 192
= Net result 22 300

III] Your Company CFO finds out a new environmental regulation has been voted on February, 17 N+1 enforcing
all companies to clean all their polluted production facilities. During its acquisition due diligences, he discovers
ENVIRO had a site contamination implying a cleaning cost estimated at € 0,8m.

 What impact does this discovery have on ENVIRO financial statements as of December, 31 N according to
IFRS?

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©Philippe Giraudon