Question : For calculating 'cash flow from operating activities' from the given figure of 'Net Profit' earned during a year, how would you deal with if Increase in Trade Receivables?
Option 1: Added
Option 2: Deducted
Option 3: Both 1 and 2
Option 4: None of the above
Answer (1)
25th Jan, 2024
Correct Answer: Deducted
Solution : Answer = Deducted
When calculating cash flow from operating activities, an increase in trade receivables indicates revenue earned but not yet received in cash. Therefore, it should be deducted from net profit to reflect the actual cash generated from operations, ensuring a more accurate depiction of cash flow from operating activities.
Hence, the correct option is 2.
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