CHAPTER 7 Statement of cash flows 317Aqeo Partnership
Statement of cash flows for the year ended 31 December 2017
Cash outflows
Inventory purchases
Salaries and wages
Car purchase
Drawings
Interest expenses
Land purchase
Loan
Other expenses paid
Total cash outflows
Cash increase (decrease)240 000
100 000
50 000
200 000
20 000
250 000
30 000
70 000
960 000
70 000
Ending cash balance $ 190 000Haily is impressed and pleased that the partnership has done so well. However, Amelia is disap-
pointed in the results, and criticises the presentation of the statement of cash flows.
Required
a. Assess why Haily is impressed.
b. Using the information presented, prepare the statement of cash flows in accordance with
approved accounting standards and give your view of the results of the Aqeo Partnership.Decision-making activities
7.47 Acquire a statement of cash flows for a company you are interested in evaluating. Normally,
the financial statements are available on the company website. If you have trouble locating the
financial statements of a company, ask at your library.
Required
Write a report for potential investors, evaluating the company by outlining its strengths and weak-
nesses. Your analysis should include an evaluation of the cash flows from operating, financing and
investing activities.7.48 The global financial crisis (GFC) was brought about by a bank-induced liquidity squeeze in
August 2007. Globally, banks realised that their balance sheets contained highly toxic subprime
mortgages and their derivatives and hedge fund managers started liquidating their positions to
try to reduce debt, thus producing a bear market in stocks. Short selling on the American bank,
Lehmann Brothers, led to its bankruptcy. Earlier, the US Federal Reserve had stepped in to rescue
other American banks such as Bear Stearns, Fannie Mae, Freddie Mac and Washington Mutual.
The whole debacle led to a shutdown in credit markets that affected share markets and trade
globally. Letters of credit for shipping, manufacturing goods exports and building programs all
collapsed. Trust had gone out of the market and banks held onto what capital they had, thus drying
up funding for business investment and expansion. Governments, the world over, started spending
to try to stimulate their economies. The process of transferring private debt (mainly large bank
debt) to the public sphere (government) had started. Now, years on from the start of the GFC, the
world is worried about government debt and how on earth the people are going to pay for it.
Most governments have brought in a combination of tax increases and reduced social spending
to help pay the interest costs and reduce the debt. In some parts of the world, citizens have not
been taking kindly to such measures. Most feel that the greed of the bankers, through their bonuses
and commissions on selling subprime mortgages and derivatives, led to the mess and yet they have
not been punished or brought to account. In fact, some commentators argue that they have just
taken the government bailouts and started the process all over again.