Question

What will be the effect of ‘Purchase of Marketable Securities for Cash’ on Cash Flow Statement?

Hint:

Transactions involving reclassification between cash and other assets, without impacting total cash flow, typically do not affect the cash flow statement.

Answer 1

Purchasing marketable securities with cash does not alter the total cash balance, as it represents an exchange between cash and another liquid asset. This transaction is viewed as a balance sheet reclassification, yielding no direct effect on the cash flow statement.