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a business’s bank balance increased by 750k during the last year. during the same period, it issued 1-million-dollar shares and repaid a loan of 750k. it purchased NCA for 200k and charged dep 100k. working capital increased by 575k
what was the profit for the year?how to solve this question?
can we solve this question by putting it on the equation of closing capital=opening capital+ additional capital+ profit- loss- drawing .????
No.
This question is testing your knowledge of Statement of Cash Flows. We know the change in the bank balance, we know the investing and financing activities and so the ‘missing figure’ is the cash flow from operating activities.
You know that the cash generated from investing activities is minus 200 and that the cash generated from financing activities is 250.
Since you know the movement in the cash which is 750, you can calculate what the cash generated from operating activities must have been.Once you know the cash generated from operating activities, you can adjust for the depreciation and the increase in working capital to arrive at the profit.
I assume that you have an answer in your book that you can check to 🙂
(Have you watched my free lectures on Statement of Cash Flows? The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.)
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