X company purchased a machine paying cash Rs. 50,000, sold inventory for cash Rs. 10,000 (at cost), and collected bills receivables of Rs. 5,000 during a month. The net effect on fund flow would be:

We analyze fund flow (working capital basis):

Transactions:
Purchase of machine (cash Rs. 50,000)
→ Fixed asset increases, cash decreases
→ Working capital decreases = (50,000)
Sale of inventory (Rs. 10,000 at cost)
→ Inventory ↓, Cash ↑ (same amount)
→ No change in working capital
Collection of bills receivable (Rs. 5,000)
→ Bills receivable ↓, Cash ↑
→ No change in working capital
Net Effect:

Only transaction affecting working capital is machine purchase:

Net decrease in fund (working capital) = Rs. 50,000

Final Answer: Decrease of Rs. 50,000

Net application of funds = Cash outflows – Cash inflows

50,000
−
15,000
=
35,000
50,000−15,000=35,000