1(a) Tagline Statement of Cash Flows For the year ended 31 December x5 RM000 Cash from operating activities:

Profit before taxation Adjustments fro: Depreciation Profit on disposal of PPE (12,000-7,400) Release of government grant Increase in insurance claim receivable Interest expense Investment income Cash generated from operations Increase in inventories Increase in trade receivables Increase in trade payables Interest paid Income taxes paid Net cash flow from operating activities Cash flows from investing activities: Purchase of plant Proceeds from the disposal of plant Proceeds from government grant Investment income Net cash inflow from investing activities Cash flows from financing activities: Proceeds of 6% loan note Repayment of 10% Loan note Capital payment under finance lease Net cash flow from financing activities Net increase in cash and cash equivalents Cash and cash equivalent at the beginning of period Cash and cash equivalents at the end of the period (2,900) 12,000 950 40 RM000 50 2,200 (4,600) (250) (300) 260 (40) (2,680) (700) (500) 1,100 (2,780) (260) (1,350) (4,390)

10,090

800 (4,000) (1,100) (4,300) 1,400 (550) 850

Working: Property plant and equipment - cost RM000 B/d 20,200 Factory disposal Plant acquired under finance 1,500 lease Other acquisitions 2,900 Bal c/d 24,600 Property plant and equipment - Depreciation Accumulated depreciation on factory disposal Bal c/d RM000 1,200 5,400 6,600 Bal b/d Charge for the year RM000 4,400 2,200 6,600 RM000 8,600 16,000 24,600

Government grant Grant released Bal c/f RM000 250 2,000 2,250 RM000 50 1,350 300 1,700 Bal b/d Received Tax Credit in income statement Paid Bal c/d Bal b/d current and deferred RM000 1,700 1,700 RM000 2,500 1,500 4,000 RM000 1,300 950 2,250

Cash paid Bal c/d

Finance lease RM000 1,100 Bal b/d 2,900 New 4,000

(b) Though there is an inflow of cash of RM1.4 million, it is still losing cash which means its going concern status may be in doubt. Generally, entities will have more cash flow from operations than their net profit. In Taglines case it is the reverse. Also its profit is mainly attributable to the sale of the factory, which is a one off transaction. There is an increase in the insurance claim and the release from government grant.

The high tax payment could be an indication that it was very profitable previously and is facing losses suddenly. Taglines inventories and receivables have increased which reflects poor financial management of these assets. The positive points are that Taglines investment in non-current assets has increased. The sale and lease back of the factory has released cash which was used to repay the expensive loan and get a cheaper and smaller loan. 4 Tiny Bubbles Statement of Cash Flows For the year ended 31 December x5 RMm Cash from operating activities: Cash generated from operations Interest paid Income taxes paid Net cash flow from operating activities Cash flows from investing activities: Purchase of plant Purchase of land and building Proceeds from the disposal of plant Interest income (24-10+6) Net cash inflow from investing activities (120) (220) 30 20 (290) RMm (336) (32) (162) (530)

Cash flows from financing activities: Proceeds from the issue of share capital 320 Issue of variable rate loan (320 - 4) 316 Redemption of 12% loan notes (312) Dividends paid (50) Net cash flow from financing activities Net increase in cash and cash equivalents Cash and cash equivalent at the beginning of period (240 + 150) Cash and cash equivalents at the end of the period (250 -(64 + 30) Reconciliation of cash flows from operations with the net profit for the period RMm Cash from operating activities: Net loss before interest and taxation Adjustments for: Depreciation Building (64) 24

274 (546) 390 (156)

Plant (296+176-310*) Intangibles Loss on sale of plant Decrease in inventories Increase in receivables Increase in trade payables Cash generated from operations

162 220 24 140 (872) 30 (336)