Question

Statement– I : Investing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents.
Statement– II : Cash payments to acquire fixed assets including intangibles and capitalised research and development results in cash outflow from investing activities.
Choose the correct option from the following :

• A. Both the Statements are true
• B. Both the Statements are false.
• C. Only Statement I is true.
• D. Only Statement II is true.

Hint:

Always remember: investing activities deal with cash flows related to purchase or sale of long-term assets or investments—not day-to-day operations.

Answer 1

The Correct Option is A

Correct Answer: (A) Both statements are accurate.

Explanation: Investing activities encompass the purchase or sale of enduring assets, including property, plant, equipment, intangible assets (such as patents, goodwill), and long-term investments. Statement II specifically identifies a cash outflow within investing activities: funds used to acquire fixed assets, such as intangibles or capitalized research and development costs. Therefore, both statements accurately describe components of investing cash flows.