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30 November, 17:51

On the statement of cash flows, the sale of long-term investments for cash is an example of: a) cash inflow in the cash flows from financing activities section b) cash outflow in the cash flows from financing activities section c) cash inflow in the cash flows from investing activities section d) cash outflow in the cash flows from investing activities section

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  1. 30 November, 19:32
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    On the statement of cash flows, the sale of long-term investments for cash is an example of cash inflow in the cash flows from investing activities section.

    Explanation:

    The cash flow statements consists of three activities -

    1. Cash flow from operating activities

    2. Cash flow from investing activities

    3. Cash flow from financing activities.

    The cash flow from operating activities deals with changes in currents assets and currents liabilities. For example - creditors debtors, stock, bills payable, etc.

    The cash flow from investing activities deals with purchase and sale of fixed assets, intangible assets etc. like - purchase of machinery, sale of plant, etc.

    Whereas the cash flow from financing activities deals with long term liabilities of the balance sheet. example - issue of shares and debentures, etc.

    Inflow and outflow of cash would result in increase and decrease of the cash balance.

    Thus, by selling of long term investments for cash is an example of cash inflow in the cash flows from investing activities.
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