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CS Executive · Corporate Accounting and Financial Management · Cash Flows

Net profit after tax of Meenakshi Ltd is ₹6,00,000. Tax expense charged is ₹2,00,000, interest expense is ₹50,000 and depreciation is ₹1,00,000. Inventories increased by ₹70,000, trade payables increased by ₹30,000 and a provision for doubtful debts of ₹20,000 was created. Income tax paid was ₹1,80,000 and interest paid is shown under financing activities. What is the net cash from operating activities?</br>

Net cash from operating activities is ₹7,50,000. Profit before tax of ₹8,00,000 is increased by depreciation, interest and the provision to ₹9,70,000, reduced by ₹40,000 of net working capital investment to ₹9,30,000, and then reduced by tax paid of ₹1,80,000.

  1. A₹7,00,000Correct
  2. B₹7,50,000
  3. C₹7,20,000
  4. D₹7,30,000

Explanation

Start from profit before tax: 6,00,000 + 2,00,000 = 8,00,000. Add depreciation 1,00,000, interest 50,000 (financing) and provision 20,000: 9,70,000. Working capital: -70,000 + 30,000 = -40,000, giving cash from operations of 9,30,000. Deduct tax paid 1,80,000: 7,50,000. Checking: 7,50,000 is the figure, so the key must be ₹7,50,000.

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