You will be given the following Income Statement and the Statement of Financial Position of the

MGT PLC for the year ended/as at 31 March 2015.

MGT PLC
Income Statement
For the year ended 31 March, 2015 (In Rs.Million)
Sales 1,000
Cost of goods sold (650)
Depreciation expense (100)
Sales and general expense (100)
Interest expense (50)
Income tax expense (40)
Profit for the year 60

MGT PLC
Statement of Financial Position
As at 31 March, 2015
31 March, 2014 31 March, 2015
(Rs.Million) (Rs.Million)
Assets
Cash 50 60
Accounts receivable 500 520
Inventory 750 770
Total current assets 1,300 1,350
Non-current assets
Property, plant & Equipment 500 550
Total assets 1,800 1,900
Liabilities and equity
Notes payable to banks 100 75
Accounts payable 590 615
Interest payable 10 20
Total current liabilities 700 710
Non-current liabilities
Long-term debt 300 350
Deferred income tax 300 310
Equity
Stated capital 400 400
Retained earnings 100 130
Total liabilities and equity 1,800 1,900

Required:
a) Prepare a statement of cash flows (direct method) for the year ended 31 March, 2015.
b) Prepare a side-by-side comparative statement contrasting two bases of reporting: (1) net
income and (2) cash flows from operations.
c) Evaluate the earning quality of MGT PLC based on the Part b) above.