Critically evaluate and compare the firm’s Profit and Loss Statement and the Cash Flow Statement and explain whether the two are in harmony of each other. Make suggestions for improvement, in case you find any dissonance. STATEMENT OF CASH FLOWSFOR THE YEAR ENDED JUNE 30, 202020202019STATEMENT OF PROFIT OR LOSSRupeesRupeesFOR THE YEAR ENDED JUNE 30, 2020CASH FLOW FROM OPERATING ACTIVITIES20202019Cash (used inygenerated from operations(278,630,685)2,187,655,623RupeesRupeesPayments for:Employees retirement benefits(27,215,164)(266,895,528)(169,478,284)(27,412,125)(308,153,275)Finance costSales - net12,359,645,87712,346,174,829Income tax(151,161,822)Cost of sales(11,111,877,733) (10,733,443,352)Net cash (used in)/generated from operating activities(742,219,661)1,700,928,401Gross profit1,247,768,1441,612,731,477CASH FLOW FROM INVESTING ACTIVITIES(233,025,294)(155,084,179)(36,172,073)(223,401,105)(132,042,342)Distribution costPurchase of fixed assets(423,206,263)(578,941,580)Administrative expensesOther expensesProceeds from disposal of fixed assets679,00019,088,500(104,264,650)Net cash used in investing activities(422,527,263)(559,853,080)(424,281,546)(459,708,097)1,153,023,3806,804,907823,486,598CASH FLOW FROM FINANCING ACTIVITIESOther income32,500,619426,779,283Long term finances obtainedRepayment of long term financesNet increase/(decrease) in short term borrowingsDividend paid405,933,294(354,095,045)1,289,311,580(276,277,262)Operating profit855,987,2171,159,828,287(303,439,245)(955,515,714)(146,760,757)Finance cost(306,630,426)(371,504,106)Profit before taxation549,356,791788,324,181Net cash generated from/(used in) financing activities1,064,872,567(978,936,433)Provision for taxation(124,080,076)(152,899,408)(99,874,357)302,171,995162,138,888139,827,966205,141NET (DECREASEINCREASE IN CASH AND CASH EQUIVALENTSProfit after taxation425,276,715635.424,773CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAREFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS580,327Earnings per share - basic and diluted66.1298.79CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR202,877,965302,171,995 STATEMENT OF FINANCIAL POSITIONSTATEMENT OF FINANCIAL POSITIONAS AT JUNE 30, 2020AS AT JUNE 30, 202020202019RupeesRupees20202019EQUITY AND LIABILITIESRupeesRupeesSHARE CAPITAL AND RESERVESASSETSAuthorized capital6,500,000 (2019: 6,500,000) ordinary shares of Rs. 10 each65.000.00065.000.000NON-CURRENT ASSETSIssued, subscribed and paid-up capitalGeneral reserve64,320,00o64,320.0003,800,000,0003,500,000,000Accumulated profit25,227,232190,768,7623,811,341,459 || 3,781,059,74914,394,09514,394,095Fixed assetsTOTAL EQUITY3,889,547,2323,755,088,762Long term depositsLIABILITIES3,825,735,554 3,795,453,844NON-CURRENT LIABILITIES1,600.161.851226,379,287CURRENT ASSETSLong term finances1,959.432.883276,729,403Long term payablesEmployees retirment benefitsDeferred taxation150,094,896118,103,558Stores, spares and loose tools93,566,49787,837,2725,021,697,279|| 3.245,348,436212,161,009243,408, 108Deferred grant2,637,881Stock in trade2,601,056,0722,188,052,804Trade receivablesAdvances, deposits, prepayments and other receivables971.214.665816,681,600263,493,834CURRENT LIABILTIES149,907,892Trade and other payablesSales tax refundable171,809,277215,340,953642,118,345544,232,849371,896,299355,547,385Unclaimed dividend6,638,4045,053,216Advance income tax/income tax refundableAccrued interest/profitShort term borrowingsCurrent portion of non-current liabilities82,844,3983,480,258,20159,566,42875,540,323Bank balances202,877,965302,171,9952,190,946,621369,637.0926,936,293,526 5,333,097,8234,271,425,7763,185,410,101TOTAL LIABILITIES6,872,481,8485,373,462,905TOTAL ASSETS10,762,029,080 9,128,551,667CONTINGENCIES AND COMMITMENTSTOTAL EQUITY AND LIABILITIES10,762,029,0809,128,551,667

Question

Critically evaluate and compare the firm’s Profit and Loss Statement and the Cash Flow Statement and explain whether the two are in harmony of each other. Make suggestions for improvement, in  case you find any dissonance. STATEMENT OF CASH FLOWSFOR THE YEAR ENDED JUNE 30, 202020202019STATEMENT OF PROFIT OR LOSSRupeesRupeesFOR THE YEAR ENDED JUNE 30, 2020CASH FLOW FROM OPERATING ACTIVITIES20202019Cash (used inygenerated from operations(278,630,685)2,187,655,623RupeesRupeesPayments for:Employees retirement benefits(27,215,164)(266,895,528)(169,478,284)(27,412,125)(308,153,275)Finance costSales - net12,359,645,87712,346,174,829Income tax(151,161,822)Cost of sales(11,111,877,733) (10,733,443,352)Net cash (used in)/generated from operating activities(742,219,661)1,700,928,401Gross profit1,247,768,1441,612,731,477CASH FLOW FROM INVESTING ACTIVITIES(233,025,294)(155,084,179)(36,172,073)(223,401,105)(132,042,342)Distribution costPurchase of fixed assets(423,206,263)(578,941,580)Administrative expensesOther expensesProceeds from disposal of fixed assets679,00019,088,500(104,264,650)Net cash used in investing activities(422,527,263)(559,853,080)(424,281,546)(459,708,097)1,153,023,3806,804,907823,486,598CASH FLOW FROM FINANCING ACTIVITIESOther income32,500,619426,779,283Long term finances obtainedRepayment of long term financesNet increase/(decrease) in short term borrowingsDividend paid405,933,294(354,095,045)1,289,311,580(276,277,262)Operating profit855,987,2171,159,828,287(303,439,245)(955,515,714)(146,760,757)Finance cost(306,630,426)(371,504,106)Profit before taxation549,356,791788,324,181Net cash generated from/(used in) financing activities1,064,872,567(978,936,433)Provision for taxation(124,080,076)(152,899,408)(99,874,357)302,171,995162,138,888139,827,966205,141NET (DECREASEINCREASE IN CASH AND CASH EQUIVALENTSProfit after taxation425,276,715635.424,773CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAREFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS580,327Earnings per share - basic and diluted66.1298.79CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR202,877,965302,171,995 STATEMENT OF FINANCIAL POSITIONSTATEMENT OF FINANCIAL POSITIONAS AT JUNE 30, 2020AS AT JUNE 30, 202020202019RupeesRupees20202019EQUITY AND LIABILITIESRupeesRupeesSHARE CAPITAL AND RESERVESASSETSAuthorized capital6,500,000 (2019: 6,500,000) ordinary shares of Rs. 10 each65.000.00065.000.000NON-CURRENT ASSETSIssued, subscribed and paid-up capitalGeneral reserve64,320,00o64,320.0003,800,000,0003,500,000,000Accumulated profit25,227,232190,768,7623,811,341,459 || 3,781,059,74914,394,09514,394,095Fixed assetsTOTAL EQUITY3,889,547,2323,755,088,762Long term depositsLIABILITIES3,825,735,554 3,795,453,844NON-CURRENT LIABILITIES1,600.161.851226,379,287CURRENT ASSETSLong term finances1,959.432.883276,729,403Long term payablesEmployees retirment benefitsDeferred taxation150,094,896118,103,558Stores, spares and loose tools93,566,49787,837,2725,021,697,279|| 3.245,348,436212,161,009243,408, 108Deferred grant2,637,881Stock in trade2,601,056,0722,188,052,804Trade receivablesAdvances, deposits, prepayments and other receivables971.214.665816,681,600263,493,834CURRENT LIABILTIES149,907,892Trade and other payablesSales tax refundable171,809,277215,340,953642,118,345544,232,849371,896,299355,547,385Unclaimed dividend6,638,4045,053,216Advance income tax/income tax refundableAccrued interest/profitShort term borrowingsCurrent portion of non-current liabilities82,844,3983,480,258,20159,566,42875,540,323Bank balances202,877,965302,171,9952,190,946,621369,637.0926,936,293,526 5,333,097,8234,271,425,7763,185,410,101TOTAL LIABILITIES6,872,481,8485,373,462,905TOTAL ASSETS10,762,029,080 9,128,551,667CONTINGENCIES AND COMMITMENTSTOTAL EQUITY AND LIABILITIES10,762,029,0809,128,551,667

Accepted Answer

Both the statement some harmony and some contradict because profit 2020 has decreased from the 2019,…