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?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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