Identify the correct sequence of the following steps involved in calculating cash flows from operating activities of a company:

(A) Operating profit before working capital changes
(B) Cash generated from operations
(C) Income tax paid
(D) Net cash flow from operating activities
(E) Goodwill amortised
Choose the correct answer from the options given below:

The correct option is (E), (A), (B), (C), (D).

To calculate the cash flows from operating activities of a company using the indirect method, we follow a systematic and standardized accounting sequence. Here is the step-by-step breakdown of how these items are ordered:

Step 1: Goodwill amortised (E)
We start with the Net Profit Before Tax and Extraordinary Items. Non-cash and non-operating expenses, such as the amortization of goodwill, are added back to this net profit because they do not involve any actual cash outflow.

Step 2: Operating profit before working capital changes (A)
After adjusting the net profit for non-cash and non-operating items (like adding back goodwill amortised), we arrive at the "Operating profit before working capital changes".

Step 3: Cash generated from operations (B)
From the operating profit before working capital changes, we adjust for changes in working capital (i.e., we add decreases in current assets and increases in current liabilities, and subtract increases in current assets and decreases in current liabilities). This adjustment gives us the "Cash generated from operations".

Step 4: Income tax paid (C)
Once the cash generated from operations is calculated, we deduct the actual income taxes paid during the financial period (net of any tax refunds received).

Step 5: Net cash flow from operating activities (D)
After deducting the income tax paid from the cash generated from operations, the final resulting figure is the "Net cash flow from operating activities".

Therefore, the logical and correct chronological sequence of steps is (E) → (A) → (B) → (C) → (D).