VIII. Think it over

Look at cash flow statement in company annual reports, and at the share prices of those companies over the past years. What happened to the share price of companies that generated more cash than they spent, and what happened to those that spent more than they generated?

IX. Test your English

Match the items (1-10) with the entries (a-j) from a Trading and Profit and Loss Account

Trading and Profit and Loss Account

£000's

			£	£
4	A.	Turnover		900
	B.	Cost of sales		550
		Gross profit		350
	C.	Distribution costs	60
	D.	Administrative expenses	45	105
				245
		Other operating income		55 300
	E.	Income from shares in related companies	15
		Income from other fixed asset investment	20
		Other interest receivable	10	45
				345
	F.	Interest payable		18
		Profit on ordinary activities before taxation		327
	G.	Tax on profit on ordinary activities		109
		Profit on ordinary activities after taxation		218
	H.	Extraordinary income	18
		Tax on extraordinary profit	6
				12
		Profit for the financial year		230
		Retained profits from last year		40
				270
		Transfer to general reserve	60
	I.	Proposed ordinary dividend	130	190
	J.	Retained profits carried to next year		80

The value of stock at the end of the year has been deducted to arrive at this figure.

1. Bank interest on the overdraft.

2. Dividends from investments in shares with voting rights in other companies.

3. Net invoiced amounts for sales.

4. This year's profits which will not be paid out to investors.

5. The delivery drivers' wages.

6. Money received for rent on buildings which have been let for a short time as they are not being used.

7. This money will probably be paid out to shareholders.

8. Telephone, stationery and legal fees.

9. An overprovision for corporation tax from last year.

Key: 17 Profit and Loss Account