Which of the following is not an investing activity?

Purchase of Short term marketable Securities which can be readily converted into cash

The correct answer is option 3- Purchase of Short term marketable Securities which can be readily converted into cash.

Purchase of Short term marketable Securities which can be readily converted into cash is included in cash and cash equivalents as it can be converted into cash easily.

As per AS-3, investing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents. Investing activities relate to the purchase and sale of long-term assets or fixed assets such as machinery, furniture, land and buildings, etc. Transactions related to long-term investment are also investing activities. Separate disclosure of cash flows from investing activities is important because they represent the extent to which expenditures have been made for resources intended to generate future income and cash flows. Examples of cash flows arising from investing activities are:

Cash Outflows from investing activities:

• Cash payments to acquire fixed assets including intangibles and capitalised research and development.
• Cash payments to acquire shares, warrants or debt instruments of other enterprises other than the instruments held for trading purposes.
• Cash advances and loans made to a third party (other than advances and loans made by a financial enterprise wherein it is operating activities).

Cash Inflows from Investing Activities:

• Cash receipt from disposal of fixed assets including intangibles.
• Cash receipt from the repayment of advances or loans made to third parties (except in case of financial enterprise).
• Cash receipt from the disposal of shares, warrants or debt instruments of other enterprises except those held for trading purposes.
• Interest received in cash from loans and advances.
• Dividend received from investments in other enterprises.