How do you do the Direct Cash Flow in Financing Activities?

How do I go about interpreting a cash flow statement?

• I understand the logic behind it but not how to go about presenting this. I have no comparative year but my data is as follows: I'd be grateful if anyone could give me some hints or tips on how to go about this. I feel like a dunce Newton Ltd Company Cash Flow Statement for the year ended 31 December 2005 £000 Net cash from operating activities 3,638** Investing Activities Purchase of Non-current Assets (5,518) Proceeds from Sale of Non-current Assets 500 Net cash used in investing activities (5,018) Financing activities Proceeds from the issue of share capital 595 Proceeds from long term borrowings 505 Dividends paid (30) Net cash (used in)/from financing activities 1,070 Net increase/(decrease) in cash and cash equivalents (310) Cash & cash equivalents at the beginning of the year (110) Cash & cash equivalents at the end of the year (420) **Reconciliation of profit from operations to net cash flow from operating activities £000 Profit from operations 2,440 Adjustments for: Depreciation 2640 Loss on sale of non-current asset 250 Increase in inventories (1,522) Increase in trade receivables (760) Increase in trade payables 1,225 Cash (used in)/from operations 4,273 Interest paid (235) Tax paid (400) Net cash (used in)/from operations 3,638

• Answer:

  See the comments Net cash from operating activities 3,638** It made this from normal trading activities Investing Activities Purchase of Non-current Assets (5,518) It bought a really expensive fixed asset/assets Proceeds from Sale of Non-current Assets 500 It sold a much smaller fixed asset/assets Net cash used in investing activities (5,018) Financing activities Proceeds from the issue of share capital 595 Proceeds from long term borrowings 505 It financed it's purchases with a share capital issue and a loan Dividends paid (30) Paid a small dividend to shareholders Net cash (used in)/from financing activities 1,070 Net increase/(decrease) in cash and cash equivalents (310) Cash & cash equivalents at the beginning of the year (110) Cash & cash equivalents at the end of the year (420) It had 310 less cash at the end of the year than the beginning **Reconciliation of profit from operations to net cash flow from operating activities £000 Profit from operations 2,440 Adjustments for: Depreciation 2640 Fixed asset depreciation takes up a lot of it's profit Loss on sale of non-current asset 250 Increase in inventories (1,522) Stock increased significantly - could be over purchase of stock/poor sales/expansion Increase in trade receivables (760) Not getting the cash in as well bad debts?/customer disputes/poor credit control Increase in trade payables 1,225 Relying on trade creditors to fund working capital overtrading/cashflow problems/potential customer disputes Cash (used in)/from operations 4,273 Fundamentally profitable Interest paid (235) Tax paid (400) Net cash (used in)/from operations 3,638