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CS Executive · Corporate Accounting and Financial Management · Cash Flows

Rohan Industries Ltd. had net profit before tax of ₹6,00,000. Items charged or credited in the statement of profit and loss: depreciation ₹80,000, interest expense ₹50,000, interest income ₹30,000, dividend income ₹20,000, loss on sale of investments ₹10,000. Trade receivables decreased by ₹40,000, inventories increased by ₹70,000, and trade payables decreased by ₹15,000. Treating interest and dividends as financing/investing items, operating profit before working capital changes and cash generated from operations respectively are:

Operating profit before working capital changes is ₹6,90,000 and cash generated from operations is ₹6,45,000. Add back depreciation, interest expense and the investment loss, deduct interest and dividend income, then net working capital changes of minus ₹45,000.

  1. A₹6,90,000 and ₹6,45,000Correct
  2. B₹6,90,000 and ₹5,85,000
  3. C₹6,70,000 and ₹6,25,000
  4. D₹6,90,000 and ₹6,05,000

Explanation

Operating profit before working capital changes = 6,00,000 + 80,000 + 50,000 + 10,000 - 30,000 - 20,000 = ₹6,90,000. Working capital changes: +40,000 (receivables decrease) -70,000 (inventories increase) -15,000 (payables decrease) = -45,000. Cash generated = ₹6,45,000.

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