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What is the difference between Operating profit and Profit before tax?
If in the exam we are given the operating profit what adjustments do we need to make for that figure in the operating activities for the statement of cash flows?You will need to work your way down to profit before tax. This is not likely to involve more than a maximum of two adjustments eg interest not yet charged in arriving at operating profit. Having arrived at pbt, you’ll then need to add the interest charge back because it’s accruals based. And then you’ll need to deduct the interest actually PAID in the year. This could be the same figure you have just previously deducted and then added back!
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