One of the recurring themes in our forensic accounting analysis is how useful the cashflow statement is for giving us insights into the quality of decisions made by management in their financial reporting. And here we're being asked to identify what concerns we have about cashflow classification from this cashflow statement. you'll see that this cashflow statement starts with operating profit rather than net income for calculating operating cash flows, and that is allowed under IFRS. We've used it here in this example as it allows us to see items such as interest expense and taxes that might be useful to an analyst. So please now pause this recording and spend 30 seconds thinking about whether there are any items shown here that could be a cause for concern in terms of cash flow statement classification. Once you've done this, you can resume the recording.

Let's now talk through the items which would be of most interest to us. Firstly, there's an increase in payables in both 2018 and 2017. It seems unusual for a company to have an increase in payables in both years, and that these increases are so sizable in terms of the impact on cash, and this is also accompanied by an increase in financing costs. This does suggest that the company could be using reverse factoring to boost its operating cash flows. Based on this, we would probably want to have a look at their trade payable days and compare this to peers and maybe also to have a look at their interest costs relative to their financial liabilities to see if there's a rational explanation for what's happening here. The next item is the level of CapEx, both in terms of tangibles and intangibles. This CapEx is really significant, particularly when compared with the level of depreciation and amortization in each year. Although this could simply be that the company is investing heavily for growth, there is a risk that the company is capitalizing costs, and this is particularly concerning given that the company is also regularly recognizing impairments on its intangible assets. So again, based on this, we would want to do some additional analysis, maybe looking at the level of CapEx to sales and comparing that with peers, and also comparing EBITDA margins to peers to see if they're under-reporting staff costs in their operating expenses.