How to calculate cash flow for TATA motors?

Please find below the question with which I have a problem. I was wondering how the cash decreases by 5 crores

Assume that in July, Tata Motors paid Rs.5 Crores to an external IT consultant for a software project that took 6 months to complete. In July how much would Tata Motors' cash and net income decrease by due to this transaction?

1 Answer(s)


Marc, Cash decreases by 5 crores because 5 crores was paid out to the IT consultant. Net income will not decrease by 5 crores since all the 5 crores will not be expensed in the same time period.