Question

    A company reported a net profit of ₹10 lakh. During

    the year, depreciation was ₹4 lakh, accounts receivable increased by ₹2 lakh, inventory decreased by ₹1 lakh, and accounts payable decreased by ₹3 lakh. What is the cash flow from operating activities using the indirect method?
    A ₹8 lakh Correct Answer Incorrect Answer
    B ₹10 lakh Correct Answer Incorrect Answer
    C ₹9 lakh Correct Answer Incorrect Answer
    D ₹7 lakh Correct Answer Incorrect Answer

    Solution

    Start with Net Profit: ₹10L • Depreciation: ₹4L – Increase in AR: ₹2L Decrease in Inventory: ₹1L – Decrease in AP: ₹3L Total CFO = 10 + 4 – 2 + 1 – 3 = ₹10

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