XYZ Ltd. reported profit before tax of Rs. 1,80,000 for the year ended 31 March 2026. Depreciation expense charged during the year was Rs. 35,000. During the year, trade receivables increased by Rs. 10,000, inventories decreased by Rs. 5,000, and trade payables decreased by Rs. 7,000. Interest paid was Rs. 4,000 and tax paid was Rs. 22,000. Using the indirect method, compute the cash flow from operating activities.

Step-by-step solution

1. Start with profit before tax: Rs. 1,80,000.
2. Add depreciation: 1,80,000 + 35,000 = 2,15,000.
3. Adjust for change in trade receivables: 2,15,000 – 10,000 = 2,05,000.
4. Adjust for change in inventories: 2,05,000 + 5,000 = 2,10,000.
5. Adjust for change in trade payables: 2,10,000 – 7,000 = 2,03,000.
6. Subtract interest paid: 2,03,000 – 4,000 = 1,99,000.
7. Subtract tax paid: 1,99,000 – 22,000 = 1,77,000.
8. Hence cash flow from operating activities = Rs. 1,77,000.

Concept tested: Indirect method of operating cash flow

Published 27 September 2026 · How this solution was prepared and checked