Profit during the year ₹20,000. During the year, there was increase in stock by ₹9,000 and decrease in debentures of ₹5,000. What is the amount of cash from operating activities?

₹11,000

The correct answer is option 4- ₹11,000.

An increase in a company's inventory indicates that the company has purchased more goods. Since the purchase of additional inventory requires the use of cash, it means there was an additional outflow of cash. An outflow of cash has a negative or unfavorable effect on the company's cash balance. Increase in current assets is deducted from the profit to calculate the cash flow from operating activity. So,
Cash from operating activity = 20,000 - 9,000
                                             = 11,000

* Decrease in debentures is a financing activity.