Financial Statements - Assessment 1, Question 1.5 c

For this question, the answer is £7500. But I'm not sure how to come to this answer. Can anybody help to explain?

Thanks!


Best Answer

  • CeeJaySix
    CeeJaySix Registered Posts: 645
    Answer ✓
    Start from profit from operations 7,300.

    Inventories have decreased, therefore you have more cash (as you didn't spend cash in the year on the difference, you just decreased existing holdings) - add the difference 500.

    Receivables have increased, therefore you have less cash (as they still owe it to you) - deduct the difference (200).

    Payables have decreased, therefore you have less cash (you have paid more of what you owe in comparison to last year) - deduct the difference (100).

    Total 7,300 + 500 - 200 - 100 = 7,500.
    daniel489

Answers

  • daniel489
    daniel489 Registered Posts: 14
    CeeJaySix said:

    Start from profit from operations 7,300.

    Inventories have decreased, therefore you have more cash (as you didn't spend cash in the year on the difference, you just decreased existing holdings) - add the difference 500.

    Receivables have increased, therefore you have less cash (as they still owe it to you) - deduct the difference (200).

    Payables have decreased, therefore you have less cash (you have paid more of what you owe in comparison to last year) - deduct the difference (100).

    Total 7,300 + 500 - 200 - 100 = 7,500.


    Thank you very much! Explained very well
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