Question

From the above information, ‘Cash flows from investing activities’ will be: % Table \begin{center} \begin{tabular}{|l|r|r|} Particulars & Purchased (\rupee) & Sold (\rupee)
Investments & 2,00,000 & 1,80,000
Goodwill & 3,00,000 & --
\end{tabular} \end{center}

• A. Inflow \rupee 3,20,000
• B. Outflow \rupee 3,20,000
• C. Outflow \rupee 20,000
• D. Inflow \rupee 20,000

Hint:

When calculating cash flows from investing activities, include all asset purchases as outflows and all asset sales as inflows. The net difference represents the cash flow from investing activities.

Answer 1

The Correct Option is B

To calculate the cash flows from investing activities, we consider the cash outflow for purchases and inflow from sales: Cash Outflows: Investments purchased = \rupee 2,00,000 Goodwill purchased = \rupee 3,00,000 Total cash outflow = \rupee 2,00,000 + \rupee 3,00,000 = \rupee 5,00,000 Cash Inflows: Investments sold = \rupee 1,80,000 Total cash inflow = \rupee 1,80,000 Net Cash Flow: \[ \text{Net cash flow} = \text{Cash inflows} - \text{Cash outflows} = \rupee 1,80,000 - \rupee 5,00,000 = \text{Outflow of \rupee 3,20,000.} \]