If the net profits made during the year are ₹50,000 and the bills receivables have decreased by ₹10,000 during the year, then the cash flow from operating activities will be equal to:

₹60,000

The correct answer is option 1- ₹60,000.

While calculating cash flow from operating activity an increase in current assets and decrease in current liabilities are to be deducted while increase in current liabilities and decrease in current assets are to be added up in the net profits.

* Net profits = ₹50,000

* Bills receivables have decreased by ₹10,000. It is a decrease in current assets so it is added back.

Cash flow from operating activity = Net profits + Decrease in Bills receivable
                                                = 50,000 + 10,000
                                                = 60,000