While calculating cash flow from operating activities which will be deducted?
Answer & explanation
Correct answer: option 3
The correct answer is option 3- Increase in Trade Receivables.
The increase in current assets and decrease in current liabilities are deducted from the operating profit, and the decrease in current assets and increase in current liabilities are added to the operating profit to arrive at the exact amount of net cash flow from operating activities. An increase in Trade Receivables is an increase in current assets.
OTHER OPTIONS
- Decrease in Prepaid Expenses- Decrease in current asset (ADDED)
- Increase in Trade Payables- Increase in current liability (ADDED)
- Decrease in Trade Receivables- Decrease in current asset (ADDED)