Question

While preparing its Cash Flow Statement, which of the following will be classified by a company as its Cash Outflow from Investing Activities?

P: Investment in Government Securities.

Q: Investment in bank deposits (having maturity of six months).

R: Proceeds from redemption of liquid mutual fund units.

S: Proceeds from bank deposits with original maturity of less than three months.

Options

• P and Q

• R and S

• Only P

• Only R

Answer 1

P and Q

Explanation:

P: Investment in government securities will result in outflow of cash from the company as money will be spent in buying these securities.

Q: Investment in bank deposits will result in cash outflow as money will be deposited with bank.