Which of the following will be added in Net Profit before tax & extraordinary items, to arrive at operating profit before Working Capital changes?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Depreciation
Under the indirect method, non-cash items charged in arriving at net profit, such as depreciation, are added back; investing and financing incomes are deducted.
Option (2) Interest income — Incorrect. It is an investing inflow, so it is deducted from net profit.
Option (3) Dividend income — Incorrect. Like interest received, it is an investing inflow and is deducted.
Option (4) Increase in Trade receivable — Incorrect. An increase in a current asset is deducted, and only after the operating profit before working capital changes is reached.
NCERT (2026-27 edition):
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