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Hello John,
In a BPP book there is an example of cash flow, where
interest received is 25
interest paid is 75then in the cash flow the figures are represented in this way
before the total of Cash generated from op. activities we add the interest expense 50, why we add and not subtract?
then before Net cash flow from operating activities there are other two lines
interest received 25
interest paid (75)why the interest is treated twice and in two different sections?
and the result is zero, since we add 50 and then 25, but in the end we deduct 75.Thank you very much
Although the net result is indeed zero, we are required to show the interest separately (along with the tax paid and the dividends paid) after showing the cash generated from operations. So we need to start with the profit before interest (which is the profit after adding back the interest paid and subtracting the interest earned).
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