Question

Inflow/outflow on what section of the SOCF? To buy trading securities?

1) Operating activities
2) Investing activities
3) Financing activities
4) Cannot be determined

Answer 1

The inflow/outflow to buy trading securities is categorized under investing activities on the statement of cash flows (SOCF).

2) Investing activities: This section of the SOCF includes cash flows related to the acquisition or sale of long-term assets, such as property, plant, and equipment, as well as investments in securities. Buying trading securities falls under the category of investments, as it involves the purchase of financial instruments (securities) with the intention of selling them for a profit in the near term.

It is important to note that the SOCF separates cash flows into three main categories: operating activities, investing activities, and financing activities. Operating activities involve cash flows related to the core operations of the business, such as revenue and expenses. Financing activities include cash flows related to raising capital or repaying debts, such as issuing or repurchasing shares, issuing or redeeming bonds, or taking out loans.

In the case of buying trading securities, it is classified as an investing activity since it involves the acquisition of an investment asset with the intent to sell it in the short term, rather than as part of the company's core operations or financing activities.

Step-by-step explanation:

Answer 2

The purchase of trading securities is classified under investing activities in the Statement of Cash Flows because it represents an outflow of cash for investment purposes, which includes buying stocks, bonds, or other financial instruments.

Step-by-step explanation:

The buying of trading securities falls under the category of investing activities on the Statement of Cash Flows (SOCF). These activities involve the purchase and sale of long-term investments and other assets, like real estate and stocks, that are not intended for resale in the normal course of business. When a company buys trading securities, it's an outflow of cash recorded in the investing section because it represents money spent on investment purposes.

Inflows and outflows in the SOCF reflect transactions that include exports and imports, payments for these goods and services, international financial investments, and the movement of monies from such investments. The inflow and outflow of capital through trading securities are just one part of a broader financial picture that includes real estate investments abroad, international borrowing, and lending.