The net profits made during the year are Rs. 50,000. Machine purchased during the year was for Rs 40,000 and non current investment sold were for Rs 1,00,000. Then during the year the cash flow from Investing activities will be equal to:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Rs. 60,000
Investing activities are the purchase and sale of long-term assets and investments. Net profit belongs to operating activities, so it is left out of this figure.
Sale of non-current investments (inflow) = Rs. 1,00,000
Purchase of machine (outflow) = (Rs. 40,000)
Net cash flow from investing activities = Rs. 60,000
Adding the net profit of Rs. 50,000 here would mix operating cash flow into investing cash flow.