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

Operating profit before working capital changes of Kaveri Ltd. is ₹8,00,000. During the year trade receivables increased by ₹1,20,000, inventories decreased by ₹50,000 and trade payables increased by ₹70,000. Income tax paid was ₹90,000. Net cash from operating activities is:

Net cash from operating activities is ₹7,10,000. Receivables increase reduces cash by ₹1,20,000, while the inventory decrease and payables increase add ₹50,000 and ₹70,000, giving ₹8,00,000 of cash generated; deducting tax paid of ₹90,000 leaves ₹7,10,000.

  1. A₹7,10,000Correct
  2. B₹7,90,000
  3. C₹6,70,000
  4. D₹5,30,000

Explanation

Cash generated = 8,00,000 - 1,20,000 + 50,000 + 70,000 = 8,00,000. Less tax paid 90,000 gives 7,10,000. Option ₹6,70,000 wrongly treats the inventory decrease as an outflow.

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