An Alternative Method of Estimating Funds from Business Operations

The alternative method of measuring funds provided by business operations in actual practice, is by recasting the profit and loss account itself. To be specific, the profit and loss account should be recast-ed so as to incorporate: (i) business revenues providing working capital on the income side (leaving out the items which are to be deducted as per Exhibit 6.1); and (ii) only those operating expenses which involve the use of working capital (leaving out the items which are to be added as per Exhibit 6.1). The balancing figure of such a statement would represent the amount of net working capital provided (or used) in business operations. Exhibit 6.2 summarizes the format of such a procedure.

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