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      Question

      A company earned net profits of Rs. 150,000 during the

      year. If the amount of debtors in the beginning and the end of the year is Rs. 1,10,000 and Rs. 1,20,000 respectively, then What will be the cash from operating activities of the company?
      A Rs.150,000 Correct Answer Incorrect Answer
      B Rs.1,40,000 Correct Answer Incorrect Answer
      C Rs.1,60,000 Correct Answer Incorrect Answer
      D Rs.1,70,000 Correct Answer Incorrect Answer
      E Rs.1,20,000 Correct Answer Incorrect Answer

      Solution

      For arriving at the cash flow from operating activities, increase in current assets are subtracted, while decreases are added. Here the debtors is a current asset which has increased by Rs.10,000 (Rs.120,000-Rs.110,000). As such, the operating cash = net profit - increase in debtors = Rs.1,50,000 – 10,000 = Rs.140,000.

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