by theory any cash goes out needs to be subtracted from profit because the money you earned in profit is being spent there. And cash coming-in needs to be added in the profit cause thats the money you are getting. when you think this way – all will make sense. but if it is confusing then payable in cash flow should be current year – previous year because if payable increased current year then it has to be positive because you have extra money which you would have otherwise paid to your vendors who supplied sth to you, and receivable, inventory should previous year – current year, because if inventory increased that means you spend extra money for increased inventory which in above example is Rs 100. he Rs 100 cash was spent on increasing the inventory from Rs 500 to Rs 600, therefore in order to make it -ve in cash you need to do last year -current year.
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