If the net profits earned during the year is Rs. 50,000 and the amount of debtors at the beginning and the end of the year is Rs. 10,000 and Rs. 20,000 respectively, then the cash from operating activities will be equal to:

To calculate net Cash from Operating Activities using the indirect method, we adjust the net profit for variations in working capital components:Opening Debtors = Rs. 10,000Closing Debtors = Rs. 20,000Increase in Debtors (Current Asset) = $20,000-10,000=$ Rs. 10,000An increase in a current asset represents a lock-up of cash, so it must be subtracted from profits:
$$\text{Cash from Operating Activities}=\text{Net Profit}-\text{Increase in Debtors}$$
$$\text{Cash from Operating Activities}=50,000-10,000=\text{Rs. }40,000$$