Below are the summarised cash flow statements for two other fashion manufacturer
ID: 2712569 • Letter: B
Question
Below are the summarised cash flow statements for two other fashion manufacturers. In your own words, comment on which one has a healthier cash flow situation. Justify your answer by explaining the significance of each of the three types of cash flows for each business:
Hermione Designs
Simply Luna
Cash flow from Operating Activities
915
(460)
Cash flow from Investing Activities
(785)
300
Cash flow from Financing Activities
500
420
Net increase / (decrease) in cash held
630
260
Cash at the beginning of the year
50
100
Cash at the end of the year
680
360
[Approximately 200 words expected in your answer]
Hermione Designs
Simply Luna
Cash flow from Operating Activities
915
(460)
Cash flow from Investing Activities
(785)
300
Cash flow from Financing Activities
500
420
Net increase / (decrease) in cash held
630
260
Cash at the beginning of the year
50
100
Cash at the end of the year
680
360
Explanation / Answer
Hermione Design s would be bettrer since it has generated cashflows from the operating activities and thus getting some operating profits whereas the other companiy incurred operating cash loss.
in Investing activities, Hermione had invested and infuse some cash to investing activities. Cash reealisation would be getting in forthcoming years.
Also the Hermione would have recived funding from outsiders. It means it is planning to expand the business through the funding recieved.
Overall Hermione Designs would be better in terms of cash flows
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