Cash sale of plant and machinery, land and Building, furniture, goodwill etc.Cash receipts from the repayment of advances and loans made to third partiesįurthermore, Examples of Cash inflow from investing activities are:.Cash payments to acquire shares or debenture investment.Cash receipts from disposal of fixed asset.The cash flow from investing activities is derived by adding all the cash inflows from the sale or maturity of assets and subtracting all the cash outflows from the purchase or payment for new fixed assets or investments.Ĭash flow arising from Investing activities typically are: A decrease in an item of current liability causes an increase in cash outflow because of payment of the liabilityĬash from operating activities = Operating profit before working capital changes + Net decrease in current assets + Net Increase in current liabilities – Net increase in current assets – Net decrease in current liabilities Investing Activities.An increase in an item of current liability causes a decrease in cash outflow because cash is saved.A decrease in an item of current assets causes an increase in cash inflow because cash is released from the sale of current assets.An increase in an item of current assets causes a decrease in cash inflow because cash is blocked in current assets.
Stage 2: Effect of changes in Working Capital is to be taken into as follows: Operating profit before working Capital changes Less: Non-cash and Non-operating Items which have already been credited to Profit and Loss Account like Loss on the sale of Long-term Investments Stage 1: Operating profit before changes in working capital can be calculated as follows: Edit Net profit before Tax and extra ordinary ItemsĪdd: Non-cash and non-operating Items which have already been debited to profit and Loss Account like The effect of changes in working capital.Calculating the operating profit before changes in working capital.The cash flow from operating activities are derived under two stages Preparation under Indirect method Operating Activities