Question
A company purchased machinery worth ₹5 lakh during the
year and repaid a long-term loan of ₹3 lakh. It generated ₹12 lakh from operations. What is the net change in working capital, if opening and closing working capital were ₹4 lakh and ₹6 lakh respectively?Solution
Change in working capital = Closing – Opening = ₹6 lakh – ₹4 lakh = ₹2 lakh (Increase) This is shown as an application of funds in the fund flow statement.
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