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Cash Flow Free essay! Download now

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Cash Flow

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Essay about cash flow

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Cash Flow Statement
 
Liz & Sophie Cash flow Statement, for the year ending 31 Dec 2008
                                                                £                 £
Cash inflows during Year 3
        From sales       (Note: 1)               140,000
        From Debtors                                6,500
                                                                             146,500
 
Cash outflows during Year 3
        Pay Creditors                               (10,000)
        Cost of products (Note: 2)           (83,333)
        Personnel Cost                             (73,000)
        Loan repayment (Note: 3)           (2,100)
        Bank Interest (Note: 4)                (1,176)
                                                                            (169,609)
 
 
Net cash outflow during year:                         (23,109)                                                                                  ======
                                                               
Opening cash balance:                                         24,000
 
Closing cash balance:  (Note: 5)                          891                                           
 
 
Please note: The brackets for outflows are listed as outflows.
 
 
Assumptions:
 
1.   Long term loan repayment of £2,100 is for the year 2007 is paid in 2008 – I take this to mean that loan took out on year 2006 and first repayment due in January 2007 second repayment in January 2008 and third will be in January 2009.
 
2.   I assume increase in stock value from 15K to 25K is not considered as purchase of stock in cash flow statement. Product purchased remains at £100K.
 
Background calculations for the Cash flow Statement
 
Note1:     Cash Sales working:
Sales Total for the year: £175,000
80 % paid cash
80/100 * £175,000 = £140,000
 
Note 2:     Cost of Products working:
Products purchased year 3: £100,000
Paid for year 3: 10/12 months
                   10/12*£100,000 = £83,333
 
Paid for next year 2009: 2/12 months
                   2/12*£100,000   = £16,666
 
Note 3:    Long term repayment working:
Long term loan: £21,000
Paid 1/10 yearly of original loan 
Therefore 1/10*£21,000 = £2,100
 
 
 
 
 
Note 4:    Bank Interest payment working:     
Bank interest 7%
Long term loan: £21,000
£21,000/10 = £2,100 * 2 year = £4,200
£21,000 - £4,200 = £16,800
Therefore £16,800 * 7% = £1,176
 
Note 5:     Cash Account working
 
 
DR
 
CR
Opening Cash
£24,000
Credit –stock
£10,000
Sales
£140,000
Creditors – product
£83,333
Debtors
£6,500
Bank Loan
£1,176
Total
£170,500
Personnel Cost
£73,000
 
 
Loan Repayment
£2,100
 
 
Total
£169,609
 
 
 
 
Therefore Closing Cash Balance is £891
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income Statement
 
Liz & Sophie Income Statement, for the year ending 31stDec 2008
                                                        £                    £
Cash Sale (Note: 6)           140,000                        
Account Sale (Note: 7)       35,000
       
                                                175,000
Cost of Goods Sold
Purchased Stock             100,000
Closing Stock                  (25,000)
Personnel cost                   73,000
Open Stock                       15,000
                                                                (163,000)
 
Gross Profit                                                   12,000 
 
Operating Expenses
   Depreciation –Assets (Note: 8) (2,300)
       
                                                                        (2,300)
Operating Profit                                           9,700
Interest – Bank loan (Note: 9)                               (1,176)               
Profit before tax (or net reported profit)   8,524         
Taxation  (Note: 10)                                        (2,120)
Profit after tax                                               6,404
Dividends                                                        (0)
Profit retained                                               6,404                                                                        
Please Note:
The brackets for outflows are listed as outflows.
Assumptions:
1.   Stock Value – Cost of the stocks have been reduced by £10k (£25k – 10K) therefore saving is reflected in the income statement.
 
Background calculations for the Income Statement
 
Note: 6       Cash Sales working:
Sales Total for the year: £175,000
80% paid cash
80/100 * £175,000 = £140,000
 
Note: 7       Account Sales working
Sales Total for the year: £175,000
20% pain non cash (on account)
20/100 * £175,000 = £35,000
 
Note: 8       Depreciation – Assets working:
Fixed assets = £23,000
Yearly Depreciation = 1/10   
Therefore 1/10 * £23,000 = £2,300
 
Note: 9       Interest – bank loan ...

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