Question

State whether the following statement is True or False.
Purchase of fixed asset is operating cash flow.

• A. True
• B. False

Answer 1

The correct option is B False

False. Purchase of fixed asset is not an operating cash flow,it is a investing cash flow activity (cash outflow because cash is going out of the business while purchasing assets). An investing activity is related to acquiring and purchasing of fixed assets whereas operating activity is the activity which is directly related to its business. Hence, purchase of fixed assets is an investing activities.