CASHFLOW STATEMENT-I

FRS7
Thenoti
onofc as
hf lowsandfundsflowshasbeenincludedina c
counti
ngs t
andar
dsformore
t
hantwode cade
s.Fore xampleintheUK SSAP10( 1976),sourc
ea ndapplic
ati
onoffunds
st
at
ement,wasane arl
yatt
emptbystandar
dsett
erst
oprovideal i
nkbe t
weenthebala
nceshe
e ta
t
t
hesta
rtoftheaccounti
ngper
iod,t
hepr of
ita
ndlossacc
ountf ort
hepe r
iodandthebala
nceshee
t
att
heendoftheperiod.

Ithasbe ena rgue dt hatpr of

itdoe snota l
wa ysgi veaus efulorme ani
ngfulpictureoft he
operat
ionsoft hec ompa ny.Fori ns t
ance :
 Sha r
eholde rsbe l
ie vetha tifac ompa nyma kesapr ofitthenthisistheamount ,whichit
coul da f
fordt opa yasdi vidend.
 Empl oyeesmi ghtbe li
evet hati fac ompa nyma kesapr ofititcana f
fordtopa yhigher
wa ges.
 Sur vivalofabus inessent it
yde pendsnots omuc honpr ofi
tbutoni tsabi
lit
ytopa ydebts
whe ntheyf alldue .
 Youwi llnot et ha tac ompa ny’spe rf
orma ncea ndpr ospectsdependsnots omuc hon
pr ofit
sbutonl iqui di
ty.
Thegr eatestadvant ageofc ashf lows t
a te
me ntisthatitprovidesinformati
onthatisina ddi
ti
onal
tothatint herestoft hea cc
ount s.Italsode scri
besth ecashf l
owofa norganisat
ionbya ct
ivi
ty.
Forinstanc e
:
 As sessingt hec ur r
entliquidityofabu si
ness,
 Pr ovidinga dditionalinforma t
ionont hebus i
ne s
sa ct
ivit
ies
,
 Pr ovidinga nove rviewoft hema jors ourc
esofc a
shi nf
lowsa ndoutflowsfrom
thebus i
ne ss,
 Agui det oe st
ima t
efuturec a s
hf l
ows ,
 De t
ermi ningc ashf lowsge neratedfrom tradinga sopposedtoot hersource
sof
financ e.

Objective
Theobj ec t
iveoft heI AS7i stoensur et hatther e
porti
nge nti
tyr eport
sont hei
rcashgenerat
ion
andca sha bsorptionf orap eri
od,byhi ghlighti
ngt hesignificantc ompone ntsofcas
hf l
ows ,i
na
wayt hatf a
c il
it
atesc ompa ri
son,andt ha titprovidesinf
or ma t
iont hatassis
tsi nt
hea s
sess
me ntof
the
irliquidity,solve nc yandfinancia
la da ptabil
it
y.
Hist
or i
c alcashf lows t
atementinforma tioni softenuse da sa ni ndic
atoroft heamount,timing
andce rtai
ntyoff utur ecashflows.Iti sa lsousefulinche ckingt hea cc
ur a
c yofpastass
essments
offuturec ashf lowsa ndine xaminingt her el
at
ionshipbe twe enpr ofi
tabili
tyandne tcas
hf l
ow
andthei mpa ctofc hangingpr i
ces.
IAS7r equiresent erprisestoprese
ntac a shflows t
atementa spa rtoftheirfinanc
ialst
ate
me nt.

De
fini
ti
ons
:

Cash:compri
sescas
honha ndanddemanddeposi
ts
Cashequiva
lents
:ar
eshort
-te
rmhighlyli
qui
dinves
tmentst
hatar
ereadi
lyconver
ti
bleto
knowna mountsofc
ashandwhicharesubj
ect
stoanins
igni
fi
cantri
skofchangei
nva l
ue.

1
Ca s
hf lowsa r
einf lows(mone ycomi ngi ntothecompa nyli
keTr a
der ecei
vable
spayi
ng
you)a ndoutflows( moneygoi ngoutl ikepa yme ntt
obuyac ar
)ofca s
ha ndcash
equivalents
Ope ra
tinga c
tivi
tie
s :ar
et heprincipalreve nueproduci
nga cti
vit
ie
soft heenter
pri
sesa
nd
otherac t
ivi
ti
esthata r
enoti nve s
ti
ngorf inancingact
ivit
ies
Invest
inga ct
ivit
ies:arethea cquis
itionanddi s
posaloflongtermasset
sa ndother
invest
me ntsnotincludedi nc a
she quivalents
Financinga c
tivi
tie
s :ar
ea c t
ivi
tie
st hatresultinchangesinthesiz
ea ndcompos i
ti
onof
theequi t
yc a
pitalandbor rowingoft hee nterpri
se.

Presentati
onofc ashflows t
atement
Thes tanda r
dl i
stthema i
nhe adingoft hec a
shf low s
tat
e ment,whi challcompaniesha
vet o
foll
owwhe npr epa
r i
ngt hec ashfl
ows tate
me nt
.Thema inhe adi
ngsa re
:
Ope r
a t
inga cti
viti
es:ope r
atingpr of
it
swi tha djustmentsforde preciat
ionornonc ashi
tems,
profi
tsa ndl ossesons al
eofnonc ur
renta ss
e t
s,a ndinter
estpaid,t
oge therwithworki
ngcapit
al
changes,tha ta r
ei ncreaseorde creaseini nventories,r
eceivabl
esa ndpa yabl
es.Ital
soinc
ludes
outfl
owsa sinteres
tpa id,d i
videndspaid,andt axpa id.
Investi
nga ctivit
ies:purc haseofnon-currenta s
seta ndproceedsonsa lesofsuchasse
ts.
Financinga ctivi
tie
s :proc e
edsont heissueofs hare sandloannotesa ndtheredempti
onofcert
ai
n
clas
sesofs ha resandl oannot es.

Ent
erpr
ise
sshouldreportc
a s
hflowsfr
omoper
ati
ngacti
vit
ie
sus
inge
it
her
:
AswithFRS1i ntheUK,I AS7r ec
ommendst
wof or
ma t
s:
 Directmethod,
I ndi
rectme t
hod.

Rese
archsugge
stst
hatt
hevas
tma j
ori
tyofpubli
shedre
por
tuset
heindi
rec
tme
thod.Youc
an
al
soseethi
sinZambi
a;a
llt
hepubl
is
hedaccount
sareini
ndi
rec
tme
thod.

Exa
mpl
esofl
ayoutoft
hec
ashf
lows
tat
eme
nt

Dire
ctme t
hod.
Thisshowsope r
ati
ngc a
shrece
ipt
sa ndpayme nts
,thatisc a
shrecei
ptsf
rom c
ust
omers
,cas
h
paymentst
osuppli
ersandpa
yme nt
sforser
vic
esa ndotherexpens
es,a
ndonbehal
fofempl
oye
es,
aggr
egati
ngtothecashfl
owfromoperat
ingact
ivit
ies.

MMSLi mit
e d.
Cashfl
ows tateme ntfortheye arended31stDe
cembe
r2004
K ‘Mill
io
ns K ‘Mi
ll
io
ns
Cashfl
owf romope rati
ngAc t
ivit
ies
:
Cashrecei
ptsf r
omc ustomers X
Cashpaidtos upplie
rsa ndempl oyees (X)
Cashgenerat
e dfromope ra
tions X
Int
ere
stpaid (
X)
Inc
omet axespa i
d (
X)
Cashfl
owbe foreextraordi
na r
yi t
ems X

2
Pr
oceedsf
rome
art
hqua
kedi
sas
ter
Se
ttl
ement X

Ne
tca
shope
rat
ingAc
tivi
ti
es X/
(X)

Cashflowf r
omi nvest
ingAc t
ivi
ti
es
Purchaseofpropert
yplantandequipme
nt (
X)
Procee
dsf r
oms aleofequipment X
Int
eres
tr e
ceived X
Divi
dendr ecei
ved X

Ne
tca
shus
edi
ninve
sti
ngAc
tivi
ti
es X/
(X)

Cas
hflowfr
omf ina
ncingActi
vit
ies
Pr
ocee
dsfr
omi ssua
nceofshar
ec a
pita
l X
Pr
ocee
dsfr
oml ongter
mbor r
owing X
Di
vide
ndspai
d (
X)

Ne
tca
shus
edi
nfi
nanc
ingAc
tivi
ti
es. X/
(X)

Ne
tinc
rea
sei
nca
sha
ndc
ashe
qui
val
ent X/
(X)

Cas
ha ndcashe
qui
val
enta
tbegi
nni
ngof
Pe
riod(not
e) X/
(X)
Cas
ha ndcashe
qui
val
enta
tendof
Pe
riod(not
e) X/
(X)

Indi
rectmethod.
Thisstar
tswiththeope
rat
ingprofi
tsandadj
ust
ingfo
rnon-
cas
hc ha
nges
,andde
bit
sandcr
edit
s,
changesinwor kingcapi
tal
,inte
restpai
da ndtaxpai
dtoreconci
lei
ttothenetca
shfrom
operat
ingacti
vit
ies.

MMSLimi
ted.
Ca
shf
lows
tate
mentf
ort
heye
are d31stDe
nde cembe
r2004

K ‘Mi
ll
io
ns K ‘Mi
ll
io
ns

Ca
shf
lowf
romope
rat
ingAc
tivi
ti
es:

Ne tprofi
tbe foreint
eres
t,t
axat
iona
nd
Ext r
aordi
na ryitems X
Adj ust
me ntf or
:
De preci
ation X
Inve s
tmenti ncome (
X)
Ope rat
ingpr ofitbef
oreworki
ng
Ca pit
alcha nges X

3
Incre
asei ntr
adeandot herrec
eivabl
es X
De cr
easeininventor
ies X
De cr
easeintradepayables (
X)
Cashge nerat
edfromope rati
on X
Int
e r
estpaid (
X)
Incomet axespai
d (
X)
Cashf l
owbe f
oreextr
aordinar
yi t
ems X
Proceedsfrome ar
thquakedisast
er
Settl
eme nt X

Ne
tca
shope
rat
ingAc
tivi
ti
es X/
(X)

Cashflowf r
omi nvest
ingAc t
ivi
ti
es
Purchaseofpropert
yplantandequipme
nt (
X)
Procee
dsf r
oms aleofequipment X
Int
eres
tr e
ceived X
Divi
dendr ecei
ved X

Ne
tca
shus
edi
ninve
sti
ngAc
tivi
ti
es X/
(X)

Cas
hflowfr
omf ina
ncingActi
vit
ies
Pr
ocee
dsfr
omi ssua
nceofshar
ec a
pita
l X
Pr
ocee
dsfr
oml ongter
mbor r
owing X
Di
vide
ndspai
d (
X)

Ne
tca
shus
edi
nfi
nanc
ingAc
tivi
ti
es. X/
(X)

Ne
tinc
rea
sei
nca
sha
ndc
ashe
qui
val
ent X/
(X)

Cas
ha ndcashe
qui
val
enta
tbegi
nni
ngof
Pe
riod(not
e) X/
(X)
Cas
ha ndcashe
qui
val
enta
tendof
Pe
riod(not
e) X/
(X)

Thef
oll
owi
ngnot
est
oac
compa
nyt
hec
ashf
lows
tat
eme
nt,whe
the
rthei
ndi
rec
tordi
rec
tme
thod
i
suse
d.

Ca
sha
ndc
ashe
qui
val
ent
2004 2003
K‘Mil
li
ons K‘Mill
io
ns
Cashonhandandbala
nces
Withbanks X X
Shortt
erminve
stment
s X X
Cashandcashequi
val
ent
s X X

4
Except
iona
landextr
aordi
nar
yit
emsar
etobes
hownunde
rthea
ppr
opr
iat
est
anda
rdhe
adi
ngs
acc
ordi
ngtothena
tureofeac
hit
em.

Thea
dva
nta
gesoft
hec
ashf
lows
tat
eme
nta
re:

 Survi
va li
nbusine
s sdependsont heabi l
ityt
oge ne
ratecas
h,whi chthecashfl
ow
 CashflowSt a
tementsa i
mt oa tt
ainbys howinghowmuc hthec ompanywa sabl
eto
gener
ateandus ei
ni t
sope r
a ti
on.
 Cashflows t
at
e mentreport
ings at
isf
iestheneedsofa l
luser
sbetter,
 Cashflows t
at
e mentiseasi
e rtopreparethanprofi
tandlossaccounts,
I ti
se a
siertoaudi
tCa shFlowSt ateme ntsascomparedtoAc c
rua lAccount
ingba
sed
sta
tements.

I
nte
rpr
eta
tionofc
ashf
lows
tat
eme
nts

Ca shf l
ows tateme ntss houl dhe l
pa ne xterna luse rt oe valua tet hee ff
ec toff inancialma nage ment
decisionst ake ndur i
ngt heye ar.Howe ver,theus e rwi llt henne edt ode cidewhe therthesec ash
move me ntsa renor ma li nrelati
ont opa s
tmove me ntsa ndc ompa rablei ndustryi nforma t
ionor
abnor ma landr equi r
ef urtherana l
ys i
s.
Ove rt imeabus inessne edst oge ne rat
epos itivec ashf lowsf r
om i tsope r
atingAc ti
vi t
ies
,
otherwi seiti sunl ikelyt osurvive.I nde ed,abus i nessmus tge ne r
a tes uffic
ientc ashf rom i t
s
operationst or ewa r
dt heva riouss take holde r
se .g.,s har eholde rs,a ndl e nders
.Ane xpa nding
compa nymi ghtha vene gati
veope rat
ingc as hf l
owa sitbui ldsupt hel evelofi tsinventory,a nd
debtor sinl inewi ththei ncreasedturnove r.Howe ve r
,a ni ncre as einwor kingc apita
lwi thouta n
increasei nturnove rmi ghti ndicat
eope r at
iona line fficiencie sa ndwi lll eadt oli
qui dit
ypr oblems .
Theus e rofac as hf lows tat
eme ntc a na lsoi de ntifyt hei mpa c tofabus iness’spe r
forma nc ein
ma nagi ngwor kingc apital.Cha ngesi nwor kingc a pitalonope r
a ti
ngc a
s hf l
owc anbea nalysed
togethe rwithwor kingc apit
alratioss uc ha st hei nve nt
oryhol di ngpe riod,t heTr ader e
c ei
va bles
’
payme ntpe ri
oda ndt heTr adepa yabl espa yme ntpe ri
od.Anot herus efulr at
iot omoni tora
busine ss’sinve stme nti nwor kingc api t
alove rt ime( anda ga instot herbus inesses)ist ha tof
wor kingc apit
a l
/sa les
.Thi sratios howshow muc hc apitalisr e quiredt of i
nanc eope rat
ionsi n
additiont othec a pitalre quire
dt of i
na nc efixe da sse ts.

Ca
shf
lowe
xami
nat
ionque
sti
ons

I
fyoua r
erequir
e dtopr epar
eac ashfl
ows t
ate
mentinanexaminat
ion,youwi
llus
ual
lybegi
ven
t
hefol
lowinginforma t
ion:
 Ai ncomes tatementfort
hepe ri
od;
 Aba lances heetatthebegin
ningandendofthepe
riod;
 Somenot estothefinanc
ialsta
tement
s.

Be
for
eyous
tar
tanyc
omput
at
iona
lwor
k,e
nsur
eyour
eadt
heque
sti
ont
hor
oughl
y.The
nbe
gin

5
bydr a ft
ingoutt hema i
nhe adi
ngsoft hes t
atement.Thes t
ateme nts houldbedr aft
edi n
accordanc ewithIAS7.
Yous houl dnow c ompletet hes t
atementst
art
ingwi tht hestra
ightforwardc alcul
ationse.g.
,
incr
ea se/
de cr
easeinc a
shf igure
,be f
oremovingont othemor ecompl exf i
gures.Don’ tfor
getto
incl
udet hec ashandc a
she quivale
ntstat
ements
;thesearealwayswor thsomema r
ks.
Yous houldbea bletocompl e
tethequesti
onwithintheti
mea vai
lable,howe ver,don’tworryif
thesta t
eme ntdoesn’tbalance.Quicklycomputethediffe
r enc
etos eei fthefiguresugge s
tsthe
causeoft hee r
ror.Howe ver,donotwa st
etoomuc htimetryingtoidentif
ymi stakes.I
t’sbett
erto
moveont othenextquesti
ona ndc omeba c
kattheendoft heexaminationifthereistime .

Conc
lus
ion

Cashf
lowsta
tementsprovi
deimporta
ntinf
ormati
onf
orext
erna
lusersofthef
ina
nci
als
tat
ement
s
onhowwellthebusine
ssismanagingitsc
ash.Thel
ong-
ter
ms ur
vivalofabusi
nes
sdepe
ndson
it
sabi
li
tyt
osuccess
full
yma na
geitscash.

Thee
xampl
ewi
lli
ll
ust
rat
ehowt
opr
epa
ret
hec
ashf
lows
tat
eme
nti
nac
cor
danc
ewi
thI
AS7.

Ani
ll
ust
rat
ion1
Thefol
lowingi
nfor
mati
onhasbe
ene
xtr
act
edf
romt
hedr
aftf
ina
nci
als
tat
eme
ntsofZa
mCo
pLt
d,
ali
mite
dl i
abi
li
tyCompany
.

ZamCopLtd
Bala
nceShe
etsasa
t31Ma
y
2006 2005
K‘Mi
ll
ions K‘Mi l
li
ons K‘Mil
li
ons K‘Mil
li
ons

Non-
cur
renta
sse
ts 4,
600 2,
700

Cur rentass
ets
Inve ntor
y 580 500
Tra der e
cei
vabl
es 360 230
Ba nk 0 940 170 900
–––– ––––––– –––– –––––––
Tot
ala
sse
ts 5,540 3,600
––––––– –––––––

Equit
yandlia
bili
tie
s
Capit
alandre
serves
Ordi
naryshar
ec api
tal 3,500 2,370
Shar
epremium 300 150
Reta
inedear
nings 1,052 470
––––––– –––––––
4,852 2,990
Non-
cur
rentl
ia
bil
it
ie
s
10%Loannote

6
(
Rede
ema
ble31Ma
y2006
) 100

Currentli
abil
it
ie
s
Tradepaya bl
es 450 365
Taxation 180 145
Bankove rdra
ft 58 688 0 510
–––– ––––––– –––– –––––––
Tot
ale
qui
tya
ndl
ia
bil
it
ie
s 5,540 3,
600
––––––– –––––––

Addi tiona lI nforma t

ion:
(i)Thei nc omes ta
teme ntfortheyea
rende d31Ma y2 006s howst
hefoll
owi ng:
K‘Mi l
lions
Ope r
atingpr of i
t 1,042
Inte r
estpa ya ble (
10)
––––––
Pr ofi
tbe f oret axat
ion 1,032
Ta xation (180)
––––––
Pr ofi
tf orf ina nci
alye ar 852
––––––
(ii)Dur ingt heye ardivide
ndspa i
dwe r
eK270,000, 000.
(iii)Profitbe foretaxat
ionha dbeenarr
iveda ta f
tercha r
gingK700,000,000f orde
prec
iat
ionon
non- curre nta ssets
.
(iv)Dur ingt heye arnon- c
urrentas
set
swi thane tbookva lueofK200,000,000we r
esoldfor
K180,000, 000.

Re quir
ed:
(a)Prepareacashflowst
a t
ementf
orZamCopLt dfortheye a
rended31Ma y2006inacc
or da
nce
withIAS7‘ Cas
hFl owState
ments
’,us
ingtheindi
rec
tme thod.
(b)Comme ntonthefi
nancia
lposi
ti
onofZamCopLt da sshownbyt heca
shfl
ows t
atementyou
havepr epar
ed.
(c)Brieflys
tat
esomeoft hewaysinwhic
hc ompani
esc ouldmanipul
atet
hei
ryear
-endcash
pos i
ti
on.

Sol
uti
ont
oil
lus
tra
tion1

Pr
epa
redi
nac
cor
danc
ewi
thI
AS7

Za
mCopLt
d
Cas
hfl
ows
tat
eme
ntf
ort
heye
are
nde
d31Ma
y2006

K‘Mi
ll
ions K‘Mi
ll
ions
Ca
shf
lowsf
romope
rat
ingAc
ti
vit
ie
s:

7
Netprof
itbe f
oreta
x 1,
032
Adjust
me ntsfor
:
Depreci
at
i on 700
Lossonsa leoft
angibl
eno
n-c
urr
enta
sse
ts 20
Int
ere
st 10
––––––
Oper
ati
ngpr ofi
tbeforewor
king
ca
pit
alchanges 1,762
I
ncre
aseininve nt
ory (80)
I
ncre
aseinre ce
ivable
s (130)
I
ncre
aseinpa yabl
es 85
––––––
Cashgener
ate
dfr
omope
rat
ions 1,637
Int
ere
stpai
d (10)
Taxpaid (
145)
Divi
dendspai
d (
270)
––––––
Ne
tca
shf
romope
rat
ingAc
ti
vit
ie
s 1,
212

Ca
shf
lowf
romi
nve
sti
ngAc
ti
vit
ie
s:

Purc
haseofnon-c
urre
ntass
ets (
2,800)
Recei
ptsfr
oms a
lesofta
ngi
ble
non-
curre
ntass
ets 180

Ca
shf
lowsf
romf
ina
nci
ngAc
ti
vit
ie
s:

Pr
oceedsfr
omissueofsha
recapi
ta
l 1,280
Repa
yme ntofl
ong-t
ermborr
owing (100)
––––––
1,180
––––––
Ne
tinc
rea
se/(
decr
eas
e)i
ncas
handcashequi
val
ent
s (
228)
Ca
shandcas
hequi
val
ent
satt
hebe
ginni
ngofperi
od 170
––––––
Ca
sha
ndc
ashe
qui
val
ent
sate
ndofpe
riod (58)
––––––

Not
e
Dividendspaidandint
ere
stpai
dmaybeshowninei
therope
rat
ingActi
viti
esor
fi
nancingAc ti
vit
ie
s.
Studentsshoul
dbepr e
pare
dtoans
werquest
ionont
hecashfl
owsthataskfor
comme nti
ng,forexample
,seet
hecommentsint
hes
oluti
ontoanil
lust
rat
ion1.

Wor
kings
:

8
 Non-cur
renta
sse
ts
K‘Mi ll
ions K‘Mill
ions
Ba
lanc
eb/
f 2,
700 De
precia
ti
on 700
Ne
wnon-c
urr
enta
sse
ts(
bal
) 2,
800 Di
sposal
s 200
Ba
lanceC/F 4,600
–––––– –––––––
5,500 5,
500
–––––– ––––––

Tax
K‘Mi
lli
ons K‘Mi l
li
ons
Ta
xpaid(
bal
anc
ingf
igur
e) 145 Ba l
anceb/f 145
Bal
anc
eC/F 180 Income
State
me nt 180
–––––– –––––––
325 325
–––––– –––––––

(
b)Comme
ntont
hef
ina
nci
alpos
it
ionofZa
mCopLt
dass
hownbyt
hec
ashf
lows
tat
eme
nt

Ther ehasbe enane tout fl

owofc ashK228,000,000t hathasleftthec ompa nywithan
overdraftofK58,000, 000.
Ther ewa ssignificante xpendit
ureonnon- curr
entassetsofK2,800, 000,000dur i
ng
theye ar
.Thi ss houldhe l
pimpr oveoperat
ionaleffi
ci
e ncya ndfuturepr ofi
ta
bi l
it
y.
Addi ti
ona lordinarysha reswe r
ei ss
uedwhi chresul
tedinac ashinflowof
K1,280, 000,000.Thi swi l
lresultinfut
urec a
shoutflowsi nthefor mofdi vidends.
Longt erml oa nsofK100,000, 000we r
erepaidwhi c
hwi l
lr e
ducei nteres
tpa yments
infuture.
Ther ehasbe ena ninc reaseinre cei
vabl
esofK130,00 0,000whi chma yme an
custome rsaret aki
ngl onge rtopa yandconsequentl
yh a
vinga na dverseimpa cton
cashf l
ows .

(c)Br
ief
lysta
tes
omeoft h ewa ysinwhi chac ompa nycouldmani
pulat
etheye
ar-
endc
ash
posi
ti
on.
(
i) Of feri
ngs hor t
-t
ermi ncenti
vestoc ust
ome r
stoinc
reas
esales
.
(
ii) Re ducingt hes e
llingpri
c et
oi ncr
e as
esales.
(
iii
) Cut ti
nge xpe nses.
(
iv) Dis posingofa ssets.
(
v) De layingpa yme ntstocredi
tsuppl i
ers.
(
vi) Enc oura gingc ustome r
stopa yearlybyofferi
ngdis
count
s.
(
vii) Resourcinge ff
ectivedebtcollect
ionprocedure
s.

Thefol
lowingquest
ionisonhowtopre
par
eca
shfl
owsta
tementusi
ngthei
ndi
rectmet
hod.You
wil
lnot
icethatf
rompr a
cti
ce,t
hecommonmet
hodi
sindi
rec
tme t
hod.St
ude
ntsshoul
dals
oknow
howtoprepar
eusingthedir
ectme
thod.
Ani
ll
ust
rat
ion2

9
Youhavebee
ngivent
hefol
lowingi
nfor
mationrel
ati
ngtoal
imit
edli
abi
li
tycompanyc
all
ed
Nobl
e.
Thi
scompanyispr
epa
ringi
tsfi
nanc
ials
tat
eme nt
sfort
heyea
rended31Ma y2006.

Nobl
eLt
d
I
ncomes
tat
eme
ntf
ort
heye
are
nde
d31Ma
y2006
K‘Mi ll
ions
Revenue 66, 600
Costofsa
les (13, 785)
–––––––
Grossprofi
t 52, 815
Dist
ributi
oncos
ts (7, 530)
Admi nis
tra
ti
veexpe
nse
s (2, 516)
–––––––
Prof
itfr
omope r
ati
ons 42, 769
Inve
stmenti
ncome 146
Fina
ncecost (1, 177)
–––––––
Pr
ofi
tbe
for
eta
x 41, 738
Ta
x (9, 857)
–––––––
Netprofi
tfortheper
iod 31, 881
Accumulatedprof
it
sbrought
For
wa rdat1June2005 28,063
–––––––
Accumula
tedpr
ofi
tscar
ri
ed
For
wa r
dat31Ma y2006 59,
944
–––––––
Nobl
eLtd
Bal
anceShe
etsa
sat31Ma
y
2006 2005
K‘Mi
ll
ions K‘Mill
ions K‘Mi
ll
ions K‘Mi l
li
ons
Non-cur
rentas
set
s
Cost 144,844 114,785
Accumulate
ddepre
cia
ti
on (27,
433) (
26,319)
–––––––– –––––––
117,411 88,466
CurrentAsset
s
Inventor
y 24,931 24,065
Trader e
cei
vabl
es 18,922 13,238
Ca s
h 3,689 47,
542 2,224 39,527
––––––– –––––––– ––––––– –––––––
Tot
ala
sse
ts 164,
953 127,993
–––––––– –––––––
Equi
tya
ndl
iabi
li
ti
es

10
Capit
alandr e
serves
Ordi
narys har
eca pi
tal 27,
000 23,331
Shar
epremi um 14,
569 10,788
Reval
uationreserve 15,
395 7,
123
Accumula t
edprofit
s 59,
944 116,908 28,063 69,305
––––––– –––––––
116,908 69,305
Non-cur r
entli
abi
li
ti
es
6%l oa nnote 17,
824 24,
068
CurrentLiabil
it
ie
s
Bankove r
draf
t 5,
533 6,
973
Tradepa yabl
es 16,699 20,324
Taxation 7,989 30,221 7,323 34,
620
––––––– –––––––– ––––––– –––––––
Tot
ale
qui
tya
ndl
ia
bil
it
ie
s 164,953 127,
993

–––––––– –––––––
Addit
ionalinforma ti
on
(i
) Dur ingt heye arende d31Ma y2006,thecompa nys ol
dapie c
eofequi
pme ntforK3,
053,000,000,r ea
lisingaprofi
tofK1,540,000,000.The r
ewe renoot
herdis posal
sofnon-
curr
e ntas s
etsduringt heye
ar.
(i
i) Pr ofitfr
omope rati
o nsisst
at
eda f
tercha
rgingde pre
c i
at
ionofK5,862,000,000.
(i
ii
) The rewe renoa mount sout
sta
ndinginrespectofinter
estpayabl
eorre
c ei
va bleasat31
Ma y2006or2005.
(i
v) The rewe renodi videndspai
dorde cl
are
ddur ingtheyear.
Require
d:
Prepa
reac as hflows t
ateme ntforNoblefort
heye arended31Ma y2006inaccorda ncewit
hIAS
7Ca s
hFl owSt ateme nts
.
Solut
iontoillustrat
ion2
NobleLtd
Cashfl
ows t
ate
mentf
ort
heye
are
nde
d31Ma
y2006
K‘Mi
ll
ions K‘Mi
ll
ions
Ca shflowsf romope ra
tingAct
ivi
ti
es
Ne tprofi
tbe for et
ax 41,
738
Adj ust
me ntsf or:
De precia
tion 5,862
Inve s
tme ntinc ome (146)
Interes
tpa id 1,177
Profitone quipme ntdi
sposa
l (
1, 540)
–––––––
Oper
ati
ngpr
ofitbe forewor
kingc
api
ta
lcha
nge
s 47,091
I
ncr
easeini
nvent ory (866)
I
ncr
easeinr
eceiva ble
s (5,
684)
Dec
reas
einpaya bles (3,
625)
–––––––
Ca
shge
ner
ate
dfr
omope
rat
ions 36,916

11
Int
ere
stre
cei
ved 146
Int
ere
stpai
d (1,
177)
Taxpaid (9,
191)
–––––––
Ne tca
s hf
romope r
a t
ingAc t
ivi
tie
s 26,
694
Cas hf
lowsfrominve st
ingAc t
ivi
ti
es
Purchaseofprope
rty,planta
nde qui
pme
nt (28,
048)
Proceedsfr
oms al
eofe quipment 3,
053
–––––––
Netcashuse
di ninves
ti
ngAc ti
viti
es (
24,
995)
Cashfl
owsf r
omf ina
ncingAc t
ivi
ti
es
Pr
oceedsfr
omi ssueofshar
ec api
tal 7,450
Repaymentoflong-t
ermborrowing (
6,244)
–––––––
Ne
tca
shus
edi
nfi
nanc
ingAc
ti
vit
ie
s 1,
206
–––––––
Ne
tinc
rea
seinca
sha ndca
shequi
val
ent
s 2,
905
Ca
shandcas
hequiva
lent
satt
hebegi
nni
ngofpe
riod (
4,749)
–––––––
Ca
sha
ndc
ashe
qui
val
ent
sate
ndofpe
riod (
1,844)
–––––––
Note
s
I
AS7a l
lowsi
nte
res
tpai
dtobeanoper
ati
ngcashf
loworaf
ina
nci
ngc
ashf
low.I
nte
res
tre
cei
ved
ca
nbeanoper
ati
ngcas
hfloworani
nvest
ingc
ashflo
w.

Wor
kings
1Ta
xati
on
K‘Mill
ions K‘Mi lli
ons
Pa
id(Bal
anci
ngf
igur
e) 9,
191 Bal
anc
eb/f 7,323
Bal
anceC/
F 7,
989 I
ncome
st
at
ement 9,857
––––––– –––––––
17,180 17,180
––––––– –––––––

K‘Mi
ll
ions
2Disposalofa
sse
ts
Pr
oce
e ds 3,053
Le
ssNBV( Bal
anc
ingf
igur
e) (1,513)
––––––
Pr
ofi
tons
ale 1,540
––––––

3Non-
curr
entAss
etNBV
K‘Milli
ons K‘Mi
ll
ions
B/
fwd 88,
466 Depr
eci
at
ion 5,862

12
Reva
lua
ti
on 8,272 Di
spos
alNBV(
W2)1, 513
Addi
ti
ons(
Bal
anc
ingf
igur
e) 28,048 C/
Fwd 117,411
–––––––– ––––––––
124,786 124,786

13