LK Ltd acquired shares in Informa Tech. and paid Rs. 2,50,000 as purchase consideration and received a dividend of Rs. 50,000 after the acquisition. Calculate the resulting cash flow of LK Ltd.
Answer & explanation
Correct answer: option 1
Correct answer: Option (1) → Rs. 2,00,000 investing activity outflow
Concept: For a non-financial company, purchase of shares/investments and dividend received on them are both Investing Activities – per Cash Flow Statement.
Purchase consideration paid for shares = Rs 2,50,000 (investing outflow).
Dividend received after acquisition = Rs 50,000 (investing inflow).
Net cash flow = 2,50,000 outflow – 50,000 inflow = Rs 2,00,000 net outflow under Investing Activities.