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Class 12th Accountancy 2017 Set1 Delhi Board Paper Solution

Question 19

Net increase in working capital other than cash and cash equivalents will increase, decrease or not change cash flow from operating activities. Give reason in support of your answer.

Answer

The formula of working capital = Current assets - Current liability

Net increase in working capital denotes that inflow (decrease in current assets and increase in current liability) is more than outflow (increase in current assets and decrease in current liability).

So the impact would be the net increase in cash flow from operating activity.