Help

rach12

Hi all,

This seems to be all I ever say at the moment HELP!!! Lol, I am just doing the June 2004 exam task 1.5 the reconcilation of operating profit, I haven't got a clue how to do this and my Kaplan book isn't helping, could anyone explain to me how they get the answers? (how bad is that still can't get it form the answers!)

Thanks
Rach

Rinske

It is the reconciliation from profit from operations to the net cash flow from operations.

You start with writing down the profit from operations.

From the income statement/ given notes:
You add the depreciation charge for the year as this is no cash that went out.
You add a loss on sale of non-current assets or deduct the gain of the sale as it is an investment activity, rather than an operating one.
You deduct any investment income as this is investment activity.

From the statement of financial position:
You add a decrease of inventories or deduct the increase
A decrease of assets means there is less cash tied up in the asset.
You add a decrease in trade receivables or deduct the increase
You add an increase in trade payables or deduct the decrease
A decrease of liability means there is more cash paid to decrease it.

This equals the cash used in/ from operations

You deduct the interest paid in the period
You deduct the tax paid on income in period

Equals the net cash used in/ from operations.

Does this help at all?

Cheers,
Rinske

rach12

Brilliant thanks for that its really helpful, I'm abit of a div, i have just found page 9, no wonder it was difficult yo answer the question!!!!!

Thanks
rach