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CMA Intermediate · Financial Management and Business Data Analytics · Cash Flow Statement - Preparation and Analysis

Net profit before tax of Sundaram Foods Ltd. is ₹6,00,000. It includes depreciation ₹80,000, loss on sale of equipment ₹20,000, interest income ₹30,000 and interest expense ₹50,000 (all interest classified under non-operating heads). Trade receivables increased by ₹40,000, inventory decreased by ₹25,000 and trade payables increased by ₹15,000. Income tax paid was ₹1,50,000. Cash flow from operating activities (interest treated as financing/investing) is:

Add back depreciation, loss and interest expense and deduct interest income to get ₹7,20,000. Net working capital changes are nil, so cash generated is ₹7,20,000. After tax paid of ₹1,50,000, operating cash flow is ₹5,70,000.

  1. A₹5,40,000Correct
  2. B₹5,70,000
  3. C₹5,20,000
  4. D₹6,40,000

Explanation

Operating profit before working capital changes = 6,00,000 + 80,000 + 20,000 - 30,000 + 50,000 = 7,20,000. Working capital: -40,000 + 25,000 + 15,000 = 0. Cash generated = 7,20,000. Less tax 1,50,000 = 5,70,000. Check the options: 5,70,000 is the result, so the key must be 5,70,000.

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