Question

For calculating ‘cash flow from operating activities’ from a given figure of ‘Net profit’ earned during a year, how would you deal with,

1. The redemption of debentures
2. Decrease in outstanding expenses
3. Increase in cash balance
4. Decrease in inventory

Answer 1

Item	Treatment in Operating Activities
(a) Redemption of debentures	No effect
(b) Decrease in outstanding expenses	Deduct from net profit
(c) Increase in cash balance	No effect
(d) Decrease in inventory	Add to net profit