New 55% Off on All Courses - Enroll Now! Click Here

    Question

    Use of cash to underrate a capital expenditure in an

    organisation involves an outflow of cash. This transaction will be reflected in the Cash Flow Statement under which of the activities?
    A Operating Activity Correct Answer Incorrect Answer
    B Financing Activity Correct Answer Incorrect Answer
    C Investing Activity Correct Answer Incorrect Answer
    D Depends on the benefits of the expenditure Correct Answer Incorrect Answer

    Solution

    Cash flow from acquisition and/or disposal of long- term assets like equipment, assets or investments, relate to cash from investing. Usually cash changes from investing are a “cash out” item, because cash is used to buy new equipment, buildings or short-term assets such as marketable securities. However, when a company divests off an asset, the transaction is considered “cash in” for calculating cash from investing.

    Practice Next