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Bank balance increases by 750, shares increase by 1000, loan is repaid of 750. Non current asset is purchased for 200 and depreciation is charged for 100. Working capital increases by 575.
What was the profit for the year.
The answer is 1,175. But the question doesn’t say if the asset purchase is by cash or credit. I tried to plug the numbers in the A=L+E formula but I’m not getting the answer.
This question is testing on statements of cash flows.
You know the end result (i.e. the increase in the bank balance) and so you can work backwards to get the cash generated from operations. From that you can work backwards to get the profit for the year.
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