Arrange the following Cash Flows from Operating Activities in sequence as per indirect method-

(A) Income Tax Paid

(B) Net Profit/Loss before Tax and Extraordinary Items

(C) Operating Profit before Working Capital changes

(D) Effects of Extraordinary Items relating to operating activity.

Choose the correct answer from the options given below:

In the Indirect Method of preparing Cash Flow from Operating Activities, the standard sequence follows this logical flow:

Starting Point:

(B) Net Profit/Loss before Tax and Extraordinary Items - This is where we begin

↓

After Adjustments:

Add back non-cash expenses (like depreciation) and deduct non-operating income

This leads to → (C) Operating Profit before Working Capital Changes

↓

After Working Capital Adjustments:

Add/deduct changes in current assets and liabilities

Calculate Cash Generated from Operations

Then deduct → (A) Income Tax Paid

↓

Final Adjustment:

(D) Effects of Extraordinary Items relating to operating activity - This comes at the end to arrive at Net Cash from Operating Activities

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Therefore, the correct sequence is: (B) → (C) → (A) → (D)

The logic is simple: Start with Net Profit → Make it operating profit → Deduct actual cash payment of tax → Adjust for extraordinary operating items.

Correct Answer: Option 2