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

The correct answer is (A) Both the Statements are true.

Explanation: Investing activities include acquisition or disposal of long-term assets such as property, plant, equipment, intangibles (like patents, goodwill), and long-term investments. Statement II further specifies one type of cash outflow that belongs under investing activities: cash spent on acquiring fixed assets, including intangibles or capitalised R&D costs. Hence, both statements correctly define aspects of investing cash flows.