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Task 1 (P4)
THE CASH FLOW STATEMENT
A cash flow statement records Associated British Foods plc money inflows and outflow - the measure of cash and cash equal value entering and leaving an organization throughout a particularize period. The cash flow empowers the proprietor, administrators, financiers and suppliers to view the organization's operations from money viewpoint so they better see how easily the operations are running, where development funding is originating from and how carefully the cash is spent. The cash flow shows sources of money, including operations, financing and investing (www.yourbusiness.azcentral.com,n.d). The following are the purposes of cash flow in Associated British food plc include;
Basically, the statement of cash flow gives the client information about the cash receipts and cash installments of the business throughout the accounting period. Though cash sources originate from a wide range of starting points, for example, client installments, credits, sales of assets and equity, the ways an organization utilize cash in probable directly trace back to costs. For example consolidated cash flow statement of the organization shows purchase of property, plant and equipment was 593 million pounds (2013) and 700 million pounds (2012).
Understanding how Associated British food deals with its cash is helpful to the stakeholders to evaluate the budgetary statement, who aren't aware of the everyday operations of the business. As it were, the organization may be reporting revenue period after period, however it doesn't fundamentally mean the organization is operating in cash. For example shareholders will want to know the payment when due. As shown in consolidated cash flow statement dividends paid to equity shareholders was 232 million pounds (2013) and 200 million pounds (2012).
Nevertheless, to enable other potential investors, lenders who are very curiously to compare different organization performance by whether the organization has cash administration under control. Bank need to verify the organization can pay back both the vital part of any credit in addition to any loan charges for utilize of the cash. For example in consolidated cash flow statement of Associated British food plc shows a decrease in short-term loans 258 million pounds in the year of 2013 and 533 million pounds in the year of 2012.
In conclusion, the above is the purpose of Associated British food plc cash flow. Also the consolidated cash flow statements shows the of values in the year of 2013 and 2012.
Task 2 (M3)
The following is the importance of different elements of cash flow statements include;
Operational Cash flow
Operational cash flow measures money inflows and outflows from main business activities. This part indicates whether an organization's revenue structure can cover all consumptions. Unless the incomes cannot, the operating cash flow will be negative. If an organization has an issue on gathering its receivables or is accumulating unsold stock that will be reflected in operational cash flow. Cash flow may depend upon the observing period. Observing the cash and forecasting operating cash flow out of the business can recognize potential deficits in advance(www.yourbusiness.azcentral.com, n.d). For example Associated British food plc consolidated cash flow statement show net cash operating activities 1,276 million pounds in the year of 2013 and 1,240 million pounds in the year of 2012.
Financial Cash flow
At the point when an organization has inadequate operating cash, it must produce cash through financing or investing activities. Financing cash flowmeasures cash produced by financing activities, including new debts and equity in addition to refunds and dividends. Changes in the liabilities and shareholder's equity part of the balance sheet are reflected here (www.yourbusiness.azcentral.com, n.d). For example, Associated British Foods plc shows net cash from financing activities 658 million pounds (2013) and 562 million pounds (2012).
Investing cash flow
Investing cash flow measures cash produced from investing activities, including purchases or sales of equipment, property or a subsidiary. As shown in the consolidated cash flow statement of Associated British Foods plc of the net cash of investing activities 625 million dollars in (2013) and 706 million dollars in (2012). Changes in things reflected in the asset part area of the balance sheet are recorded here. Developing organizations regularly demonstrate a negative investment cash flow because of all the capital expenses. Striving, assets- rich organizations frequently demonstrate regular asset sales deals that balance negative or low operational cash flow.
Periodic Review of the cash flow statement
Normally, the higher the operational cash flow, the more powerful the organization. By periodically assessing the cash flow statement, fast developing organizations can recognize the requirement for cash and utilize financing to cover the deficits. A troubled organization could take off financial distressby seeing negative operating cash, minimum investing cash and remarkable financing cash flow. The proprietor who sees this could rebuild operations and renovate the financing structure(www.yourbusiness.azcentral.com, n.d). For example Associated British food plc in the consolidated cash flow statement shows cash and cash equivalents at the end of the period 243 million pounds (2013) and 245 million pounds (2012).
In conclusion, the above is the importance of different elements of cash flow statement in the Associated British food plc. The elements of cash flow statement include operating, financial, investing and periodic review cash flow.
Task 3 (D2)
The following is the evaluation of changes in the financial position of Association British food plc include;
Net cash flow from operating activities was extremely solid in2013 compare to 2012, expanding from £1,240 m to £1,276 m. This growing was driven by the higher benefit and the expansion of non- cash items things of amortization, deterioration and impairment charges which, altogether, were marginally higher this year. This was somehow offset by a working capital surge of £97 m contrasted with a year ago inflow of £43 m and higher corporation taxes.“The long-term performance of the group is important to us and this year’s growth is in line with the compound annual revenue and profit growth achieved over the last ten years of 10% and 11% respectively” (http://www.abf.co.uk, n.d). . On my point view, Associated British food plc the position and performance is in good state in operational activities no changes should be done.
The net cash of financing activities increased in 2013 (656 million pounds). I recommend the Association British food plc should consider theliquidity performance.Liquidity riskis the danger that Associated will experience trouble in meeting its commitments connected with its cash related liabilities as they fall due. The financial department is in charge of observing and overseeing liquidity and guarantees that the gathering has adequate headroom in its conferred offices to meet unforeseen or unusual requirements. The organization likewise has admittance to uncommitted offices to help with short-term funding requirements. However the amount spent for investing activities decreased 706 million pounds (2012) to 625 (2013). Therefore the performance is good since there is decrease of spending.
In conclusion, the above shows the evaluation of changes in financial position of Association British food plc using cash flow.