CS Executive · Corporate Accounting and Financial Management · Cash Flows
Kaveri Ltd had opening debtors of ₹2,00,000 and closing debtors of ₹2,60,000. Opening creditors were ₹1,50,000 and closing creditors ₹1,30,000. Closing stock rose by ₹40,000 over opening. Profit before working capital changes was ₹6,00,000. What is cash generated from operations?
Cash generated from operations is ₹4,80,000. The rise in debtors (₹60,000), fall in creditors (₹20,000) and rise in stock (₹40,000) each consume cash, totalling ₹1,20,000, which is deducted from operating profit of ₹6,00,000.
- A₹4,80,000Correct
- B₹6,20,000
- C₹4,40,000
- D₹7,20,000
Explanation
Increase in debtors ₹60,000, decrease in creditors ₹20,000 and increase in stock ₹40,000 all reduce cash, totalling ₹1,20,000. 6,00,000 - 1,20,000 = ₹4,80,000. Treating the creditor decrease as an inflow would give ₹5,20,000 and is wrong.
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