In case the net profits made during the year by a company are ₹50,000 and bills payable have increased by ₹10,000 during the year then the cash flow from operating activities for the company will be:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) - ₹60,000.
Increase in current liabilities are added and decrease in current liabilities are deducted from net profit to calculate the cash flow operating activity.
Net profit = 50,000
Add: Increase in B/P = 10,000
Cash flow from operating activity = (50,000 + 10,000)
= ₹60,000