While making cash flows from operating activities, which one of the following will be deducted from Cash generated from operations?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Tax Paid
Cash generated from operations is the operating cash figure before income tax. The income tax actually paid during the year is then deducted from it to arrive at the net cash flow from operating activities.
Why the other options are incorrect
Option (1) Increase in Current Assets and Decrease in Current Liabilities — Incorrect. These working capital changes are adjusted before cash generated from operations is reached, so they are already inside that figure.
Option (3) Tax Made — Incorrect. Only tax actually paid in cash is deducted; tax that is merely provided for is not a cash payment.
Option (4) Dividend Paid — Incorrect. A dividend paid is a financing outflow, so it has no place in operating activities.
NCERT (2026-27 edition): |