Identify the correct sequence of the following steps involved in calculating cash flows from operating activities of a company:(A) Operating profit before working capital changes(B) Cash generated from operations(C) Income tax paid(D) Net cash flow from operating activities(E) Goodwill amortised Choose the correct answer from the options given below:
- A(E), (C), (D), (A), (B)
- B(E), (A), (D), (B), (C)
- C(E), (A), (B), (C), (D)
- D(A), (B), (C), (D), (E)
Solution & Step-by-step Explanation
Let's trace the standard format of Cash Flow from Operating Activities (Indirect Method):Start with Net Profit Before Tax. Add non-cash items like Goodwill amortised (E).This yields Operating profit before working capital changes (A).Adjust for changes in Current Assets and Current Liabilities to arrive at Cash generated from operations (B).Deduct Income tax paid (C).The final resulting balance is Net cash flow from operating activities (D).Thus, the sequence is (E), (A), (B), (C), (D).