Question and Answer of Finance

Question 1

Lion plc’s Income Statement for the year ended 31 December 2022 and the Statements of Financial Position as at 31 December 2021 and 2022 are as follows:

Income Statement for the year ended 31st December 2022

£m

Revenue 1,450

Cost of sales (570)

Gross profit 880

Administrative expenses (638)

Operating profit 242

Net interest payable (34)

Profit on ordinary activities before taxation 208

Taxation (65)

Profit on ordinary activities after taxation 143

Statement of Financial Position as at 31 December 2021 and 2022

2021 2022

£m £m

Non-current assets

Land 1500 1500

Plant and equipment 510 490

2010 1990

Current assets

Inventories 440 670

Trade receivables 88 195

Cash and Cash equivalents 210 213

738 1078

Total assets 2748 3068

Shareholders equity and liabilities

Capital and reserves

Called up share capital 1600 1700

Share premium account 400 450

Retained earnings 355 468

2355 2618

Non-current liabilities

Borrowings 230 230

Current liabilities

Trade payables 120 190

Tax payable 43 30

163 220

2748 3068

During 2022, the business spent £50m on additional non-current assets. There were no other non-current assets acquisitions or disposals. A dividend of £30m was paid on ordinary shares during the year.

Required

1. Prepare a cash flow statement for Lion plc for the year ended 31st December 2022.
2. Make any relevant comments about Lion plc’s cash flow statement which you feel should be drawn to the attention of its management.