Hero Ltd, started a new venture of making casual shirts. The directors decided to issue 5,000,00 shares of Rs. 10 each at Rs. 12 each. The following assets were purchased by the company
A building of Rs. 10 lakhs
Furniture of Rs. 7 lakhs
Machinery of Rs. 2 lakhs
The company purchased cloth of Rs. 20 lakhs and paid wages Rs. 5,00,000 to the workers. The Directors also decided to buy 10,000 shares of TATA Ltd. of Rs. 10 each and at the end of the year Tata Ltd. Paid Rs. 10,000 as dividend
What is the Cash flow from investing activities?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Rs. 19,90,000 (outflow)
Investing activities cover the buying of fixed assets and investments and the income received on investments. Cloth and wages belong to operating activities, and the issue of shares to financing activities, so they are left out.
Building = Rs. 10,00,000 (outflow)
Furniture = Rs. 7,00,000 (outflow)
Machinery = Rs. 2,00,000 (outflow)
10,000 TATA Ltd. shares × Rs. 10 = Rs. 1,00,000 (outflow)
Dividend received = Rs. 10,000 (inflow)
Net cash used in investing activities = Rs. 20,00,000 − Rs. 10,000 = Rs. 19,90,000
Note: It seems that there is a mistake in the original NTA question. Option (1) was printed as Rs. 19,00,000, which counts only the building, furniture and machinery and leaves out the purchase of the TATA Ltd. shares and the dividend received on them, so none of the printed options gave the cash flow from investing activities. For the benefit of students and to ensure that the question is correct and has a single valid answer, Option (1) has been changed to Rs. 19,90,000 (outflow).
NCERT (2026-27 edition):
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