For calculating ‘Cash flow from operating activities’ why decrease in Trade Receivables or bills receivables are added to operating profits?

SOLUTION

Decrease in Trade Receivables or bills receivables indicate that collection from Trade Receivables or bills receivables are more than the amount of credit sales during the year. Hence, the decrease in Trade Receivables or bills receivables is added to operating profits for arriving at the figure of net cash generated from operating activities.


Leave a Reply