Question

Your Team is part of the new intake of trainee consultants working for Marlyn Plc, one of the world’s leading financial consultancies. A senior consultancy team has been assigned to this project, but it has been decided to allow your trainee group to shadow the consultancy team for work experience purposes.

Your Team’s task focuses on the evaluation of a packaging and distribution company, Wy-Post Ltd, and making an evidenced case to clients as to whether they should or should not buy shares in that company. Wy-Post Ltd has seen a steady increase in demand for its services with the growth of the online shopping market over the last 5 years, and has seen success within the UK market. As part of the initial information gathering undertaken by Marlyn Plc you have been provided with results from the closest competitor, DML Couriers, for consideration in your analysis.

You may wish to draw upon a range of other factors and information in arriving at a conclusion of the performance of the company over the three most complete financial years. Your analysis should include the calculation and interpretation of relevant financial ratios and other performance indicators. You should place your analysis in the context of the current and immediate future economic and business landscape of the company.

Marlyn Plc has provided your team with the following financial data (in £000) for the last 3 years ended July 31^st:

Extracts Income Statements and Balance Sheets	2017	2018	2019
Sales	3,840	5,760	8,448
Cost of Sales	1,920	2,688	5,608
Distribution costs	384	462	676
Administrative expenses	1095	1,268	1,260
Interest expense (paid)	135	192	576
Taxation	76	268	150
Retained Profit	115	652	128
Fixed assets at cost	1,765	2,285	4,915
Accumulated depreciation	192	422	1,690
Closing Inventory at cost	154	346	752
Trade receivables	384	961	1,589
Prepayments	55	192	230
Overdraft	176	211	2,262
Trade payables	190	308	624
Accruals	155	384	576
Taxation payable	76	268	150
Debentures	640	385	250
Ordinary share capital £1	775	1000	1000
Retained earnings/Reserves	154	806	934

Notes:

There have been no disposals of fixed assets (non-current assets) during any of the three years. During each of the years ended 31^st July 2017, 2018 and 2019 dividends were announced for year and paid in cash on the last day of that year.

Latest period comparative results for DML Limited (2019)

  

Profitability ratios
Return On Shareholder Funds	35%
Return On Capital Employed	47%
Operating Profit margin	12%
Gross Profit margin	51%
Efficiency ratios
Trade Receivables days	50 days
Trade Payables days	45 days
Inventory days	30 days
Liquidity ratio
Current Ratio	1.5 times
Gearing ratios
Gearing	50%
Interest cover	4 times
Investment ratio
Earnings Per Share	72 pence

QUESTION IS THE FOLLOWING:

Requirement 2: [10% of marks available]

Using the Indirect method, prepare a Statement of Cash Flows suitable for publication for the most recent year for the business.

Your financial figures in the Statement should be shown in £000s.

Do note that the marks available for each relevant figure are for correct figures only. Marks are also awarded for layout and presentation of the Statement.

You must show your workings for this requirement. If workings are not shown, you will receive zero for this requirement.

Answer 1

Answer is given below