Milson Engineering Ltd : Cashflow Statement for the year ending 30^th June 2020

Cashflow from operating activities

Operating Profit 463,000

plus Depreciation 12,500

less increase in inventory (29,400)

less increase in receivables (15,800)

less decrease in payables (12,700)

Cash generated from Operations 417,600

less interest paid (5,700)

less taxation paid (re. Y.E. 30/6/19) (109,900)

Net cash inflow from operations 302,000

Cashflow from investing activities

Purchase of non-current assets (5,000)

Disposal of non-current assets 1,500

Net cashflow from investing activities (3,500)

Cashflow from financing activities

New Share Capital issued 0

Loan repayments (7,500)

Dividends paid (380,000)

Net Cashflow from financing activities (387,500)

Net Decrease in cash (89,000)

Cash as at 1st July 2019 59,500

Cash as at 30^th June 2020 (29,500)

The pre-seem material referred to Milson Engineering Ltd. bank manager being concerned about the companys deteriorating cash position. What does the cashflow statement in the pre-seen material reveal about possible causes for MELs recent poor cashflow? State and briefly explain the possible contributory factors, over which the company could exert some level of corrective action