XYZ Ltd. reported a profit before tax of Rs. 1,20,000 for the year ended 31 March 2026. Depreciation charged during the year was Rs. 30,000. During the year, trade receivables increased by Rs. 15,000, trade payables decreased by Rs. 10,000 and inventories decreased by Rs. 5,000. No interest or tax was paid. Compute the cash flow from operating activities using the indirect method.

Step-by-step solution

1. Start with profit before tax: Rs. 1,20,000.
2. Add back non‑cash depreciation expense: +Rs. 30,000 = Rs. 1,50,000.
3. Increase in trade receivables uses cash, so subtract Rs. 15,000 → Rs. 1,35,000.
4. Decrease in trade payables uses cash, so subtract Rs. 10,000 → Rs. 1,25,000.
5. Decrease in inventories releases cash, so add Rs. 5,000 → Rs. 1,30,000.
6. No interest or tax paid, so no further adjustment. The cash flow from operating activities is Rs. 1,30,000.

Concept tested: Indirect method cash flow calculation

Published 24 September 2026 · How this solution was prepared and checked