PEAR Inc.

Balance Sheet As At 31 Dec 2022

2022 2021
Amounts in $'000 Amounts in $'000
Cash 185 150
Account Receivables 120 98
Inventory 94 68
Total current assets 399 316
PPE 234 202
Total Assets 633 518

Acounts Payable 105 95

Salaries Payable 42 30
Interest Payable 3 2
Income Tax Payable 6 4
Total Current Liabilities 156 131
LT Borrowings 100 80
Total Liabilities 256 211
Share Capital 150 150
Retained Earnings 227 157
Total Equities 377 307
Total Liabilities and equities 633 518

Income Statement for the year ended 31 Dec 20022

$'000
Sales 250
Cost of Goods sold(1) (60)
Gross income 190
Salaries(2) (80)
EBITDA 110
Depreciation (23)
EBIT(Operating income) 87
Interest Expense (3) (8)
Income before Tax (EBT) 79
Income Tax Expenses(4) (9)

Net Income 70
 PEAR Inc.

Cash Flow statement for the Year Ended 31 Dec 2022

Direct Method
$'000
Cash Flow from operating activities
Cash Received from Customers 228
Cash Paid to suppliers (1) (76)
Cash Paid to employees(2) (68)
Interest Paid(3) (7)
income Taxe Paid (4) (7)
Net Cash Flow from Operating activities 70

Cash Flow from investing Activities

Purchase of PPE (70)
Cash Receipt from Sale of PPE 15
Net Cash Flow from investing Activities (55)

Cash Flow from Financing Activities

Proceeds from LT Borrowings 20
Net Cash Flow from Financing Activities 20

Net Cash Flow (Net Increase in cash) 35

Cash As At 1st of January 2022 150

Cash As At 31st of December 2022 185
Net Cash Flow 35
 PEAR Inc.

Cash Flow statement for the Year Ended 31 Dec 2022

Indirect Method
$'000 1-Start with Net
Net Profit/Loss 70
Income

Depreciation 23
Amortisation 0 2-Add Back non-
Gain/Loss on Sale of NCA's 0 Cash Expenses

(Increase)/Decrease in Invetory (26) 3-Adjust For

(Increase/Decrease in Receivables (22) Movement in Working
Increase/(Decrease) in Payables 25
Net Cash Flow from Operating Activities 70

Cash Flow from investing Activities

Purchase of PPE (70)
Cash Receipt from Sale of PPE 15
Net Cash Flow from investing Activities (55)

Cash Flow from Financing Activities

Proceeds from LT Borrowings 20
Net Cash Flow from Financing Activities 20

Net Cash Flow (Net Increase in cash) 35

 PEAR Inc.

CASH FLOW IDENTITY

CASH FLOW CASH FLOW CASH FLOW

FROM ASSETS = TO CREDITORS + TO OWNERS
Cash flow from Assets = OCF – NCS - ∆ NWC 101-55-58 = -12
OCF = EBIT + Depreciation – Taxes 87+23-9 = 101
NCS(CapEx) = End. Net Fixed Assets – Beg. Net Fixed Assets +
Depreciation
234-202+23 = 55
(399-156)-(316-
∆NWC=Ending NWC (End CA-End CL)– Beginning NWC(Beg. CA-Beg CL) 131)=243- = 58

Cash Flow to Creditors = Interest Expense – Net New Borrowing from

Creditors 8-20 = -12
Net New Borrowing = Ending Long-term Liabilities – Beginning Long-term
Liabilities 100-80 = 20

Cash Flow to Owners = Dividends – Net New Borrowing from Owners - = 0

Net New Borrowing from Owners = Change in Equity - = 0

Change in Equity = Ending Common Stock and Paid-in-Surplus - Beginning

Common Stock and Paid-in-Surplus 150-150 = 0

NB: based on the accounting identity and double-entry accounting principles explained earlier, an increase
in an asset (except cash) would result in a use of cash, while a decrease (sale) of an asset would result in a
source of cash. Similarly, an increase in a liability or owners’ equity would bring in cash while a decrease
would take away cash.

Free Cash Flow

the cash available to pay the creditors and owners once the firm has
made the investments in working capital and capital assets necessary for
continuing and growing the business
FCF =Cash Flow from oprerating activities
- CapEx 70-55 = 15