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A business’s bank balance increased by $750,000 during it’s last financial year . During the same period it issued shares, raising $1million and repaid a loan of $750, 000. It purschased a non- current asset for $200, 000 and charged depreciation of $100,000. Receivales and inventory increased by $575,000.
What was it’s profit for the year?
Please kindly assist as my answer was $1,275,000 wrong but the right answer was not explained properly and was $1,175,000
The question is testing Statement of cash flows.
Cash operating activities + cash from investing activities + cash from financing activities = 750,000
So, cash from operating activities – 200,000 + 250,000 = 750,000
So, cash from operating activities = 700,000
Cash from operating activities = profit + depreciation – increase in rec/inv
So, 700,000 = profit + 100,000 – 575,000
So profit = 700,000 – 100,000 + 575,000 = 1,175,000
I am most grateful sir.
You are welcome 🙂