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Identify the correct sequence in calculation of Cash Flow from Operating Activities.

(A) Addition and subtraction of Non cash/Non operating items

(B) Payment of income tax

(C) Calculation of operating profit before working capital changes.

(D) Calculation of net profit/loss before tax and extraordinary items

Choose the correct answer from the options given below :

Solution

✅ Correct Option: 1

Indirect method sequence: start with Net profit before tax and extraordinary items (D), adjust for non-cash and non-operating items (A) to get operating profit before working capital changes (C), then adjust working capital changes and finally deduct income tax paid (B).

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