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CMA Intermediate · Financial Management and Business Data Analytics · Cash Flow Statement - Preparation and Analysis

Under AS 3 (Cash Flow Statements), which of the following items is classified as a cash flow from financing activities in the case of a manufacturing company?

Proceeds from issue of equity shares are a financing cash flow because they change the owners' capital and borrowings of the enterprise. Purchase and sale of plant and interest received on investments relate to acquiring or disposing of long-term assets and returns on them, so they are investing activities.

  1. AProceeds from issue of equity sharesCorrect
  2. BPurchase of plant and machinery
  3. CInterest received on investments
  4. DProceeds from sale of old machinery

Explanation

Financing activities change the size and composition of owners' capital and borrowings. Issue of equity shares raises owners' capital, so it is financing. Plant purchase, interest received on investments and sale of machinery are investing activities.

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