Question

Statement I: Sale of marketable securities will result in flow of cash.
Statement II: Cash flow implies movement of cash in and out due to some non-cash items.
Choose the correct option from the following:

• A. Both the statements are true.
• B. Both the statements are false.
• C. Statement I is true, Statement II is false.
• D. Statement I is false, Statement II is true.

Hint:

Cash flow statements only include actual cash transactions.
Non-cash adjustments are excluded from the direct flow entries.

Answer 1

The Correct Option is C

Statement I: Sale of marketable securities brings in cash.
\(\Rightarrow\) This is a cash inflow and is True.
Statement II: Cash flow refers to actual inflow and outflow of cash.
Non-cash items like depreciation do not cause cash movement.
\(\Rightarrow\) Statement II is False.
\(\Rightarrow\) Correct choice is (C) — Statement I is true, Statement II is false.