Target Exam

CUET

Subject

-- Accountancy Part B

Chapter

Cash Flow Statement

Question:

Cash from Operating activities will decrease due to:

Options:

Increase in Current Assets

Decrease in Current Liabilities

Both 1 and 2

None of 1 and 2

Correct Answer:

Both 1 and 2

Explanation:

The correct answer is option 3- Both 1 and 2.

The increase in current assets and decrease in current liabilities are deducted from the operating profit before working capital changes, and the decrease in current assets and increase in current liabilities are added to the operating profit before working capital changes, so as to arrive at the exact amount of net cash flow from operating activities.