The following information has been extracted from the draft financial information of V Ltd:

(a) You are required to prepare a cash flow statement for V Ltd for the year ended 31 December 20X3 in accordance with the requirements of Financial Reporting Standard 1.

(b) It has been suggested that the management of long-term profitability is more important than short-term cash flow. Explain why this might be so.

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Profit and Loss Account for the year ended 31 December 20X3 Sales Raw materials consumed Staff costs Depreciation Loss on disposal Operating profit Interest payable Profit before tax Taxation Dividend Profit retained for year Balance brought forward £000 (49) (37) (74) (4) £000 495 (164) 331 (23) 308 (87) 221 (52) 169 389 558