A company has surplus cash available and decides to purchase a 270-day treasury bill. The correct classification of the purchase on the Statement of Cash Flows would be
A) as an Net change in cash equivalents.
B) as a cash outflow in operating activities.
C) as a cash outflow in investing activities.
D) as a cash outflow in financing activities.

Question

Quizplus · Accepted Answer

Purchasing a treasury bill is considered an investment activity, as it involves the acquisition of a financial asset with the intention of generating a return. As such, the purchase should be classified as a cash outflow in investing activities on the Statement of Cash Flows.

A Company Has Surplus Cash Available and Decides to Purchase