Question

If the net profit of the company is Rs 35,000 after writing off goodwill of Rs 16,000 and loss on sale of machinery of Rs 5,000, then cash flow from operating activities will be:

• A. 56,000
• B. 41,000
• C. 30,000
• D. 14,000

Hint:

Add back all non-cash expenses and losses on asset sales to net profit to calculate cash flow from operating activities.

Answer 1

The Correct Option is A

Cash flow from operating activities starts with net profit. Non-cash expenses (goodwill written off) and losses on sale of assets are added back because they reduce profit but do not affect cash.
Therefore, Cash flow from operating activities = Rs 35,000 + Rs 16,000 + Rs 5,000 = Rs 56,000.