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If the net profits made during the year are Rs. 1,00,000 and the bills receivables have decreased by Rs. 10,000 and purchase of machinery is Rs.2,00,000 during the year then the cash flow from operating activities will be equal to:

Solution

✅ Correct Option: 1

A decrease in bills receivable releases cash and is added to net profit: 1,00,000+10,000=1,10,0001{,}00{,}000 + 10{,}000 = 1{,}10{,}000. Purchase of machinery is an investing outflow and does not affect operating cash flow.

Note: Options 2 and 4 carry the same figure in the original paper; this does not affect the answer, which is option 1.

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