For the year ended 31 March 2026, a company reported profit before tax of Rs. 1,50,000. Depreciation charged during the year was Rs. 25,000. During the year, trade receivables increased by Rs. 20,000, inventories decreased by Rs. 8,000 and trade payables increased by Rs. 12,000. Interest paid was Rs. 5,000 and tax paid was Rs. 18,000. Using the indirect method, compute the cash flow from operating activities.

Step-by-step solution

1. Start with profit before tax: Rs. 1,50,000.
2. Add back depreciation (a non‑cash expense): Rs. 1,50,000 + 25,000 = Rs. 1,75,000.
3. Subtract interest paid (cash outflow): Rs. 1,75,000 – 5,000 = Rs. 1,70,000.
4. Subtract tax paid (cash outflow): Rs. 1,70,000 – 18,000 = Rs. 1,52,000.
5. Adjust for working‑capital changes:
6. • Increase in trade receivables reduces cash: Rs. 1,52,000 – 20,000 = Rs. 1,32,000.
7. • Decrease in inventories adds cash: Rs. 1,32,000 + 8,000 = Rs. 1,40,000.
8. • Increase in trade payables adds cash: Rs. 1,40,000 + 12,000 = Rs. 1,52,000.
9. Resulting cash flow from operating activities = Rs. 1,52,000.

Concept tested: Operating cash flow – indirect method

Published 26 September 2026 · How this solution was prepared and checked