CS Executive · Corporate Accounting and Financial Management · Cash Flows
Kaveri Foods Ltd has operating profit before working capital changes of ₹8,00,000. During the year inventories rose by ₹1,50,000, trade receivables fell by ₹60,000 and trade payables rose by ₹40,000. Ignoring tax, what is the cash generated from operations?
Cash generated from operations is ₹7,50,000. Starting with ₹8,00,000, deduct the ₹1,50,000 inventory increase, then add the ₹60,000 fall in receivables and the ₹40,000 rise in payables, since these changes respectively use and release operating cash.
- A₹7,50,000Correct
- B₹7,90,000
- C₹8,50,000
- D₹9,10,000
Explanation
Increase in inventory reduces cash: -1,50,000. Decrease in receivables adds cash: +60,000. Increase in payables adds cash: +40,000. Net: 8,00,000 - 1,50,000 + 60,000 + 40,000 = 7,50,000. The option ₹7,90,000 wrongly treats the inventory change as only ₹1,10,000 (for example by ignoring the payables sign).
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