Arrange the following into correct sequence while computing cash flow from operating activities.(a) Compute Net Profit before tax after making necessary adjustments.(b) Compute operating profit before working capital changes by making adjustment for non-cash and non-operating activities.(c) Calculate the difference between opening and closing balance in statement of profit and loss.(d) Compute operating profit by making adjustment for working capital changes.(e) Calculate cash generated/cash used from operating activities by deducting tax paid from operating profit.Choose the correct answer from the options given below:
- A(a), (c), (d), (b), (e)
- B(c), (a), (d), (b), (e)
- C(a), (b), (d), (c), (e)
- D(c), (a), (b), (d), (e)
Solution & Step-by-step Explanation
Sequence to prepare Cash Flow from Operating Activities: (c) Start with difference between opening and closing balance of P&L. (a) Make necessary adjustments to compute Net Profit before tax. (b) Adjust for non-cash and non-operating items to get operating profit before working capital changes. (d) Adjust for working capital changes to compute cash generated from operations. (e) Deduct tax paid to find the final cash flow from operating activities.Order: (c), (a), (b), (d), (e).