In which section of the statement of cash flows would the purchase of new machinery be included?Cash flows from financing activities.Cash flows from operating activities.Purchases of new equipment items are not included in the statement of cash flows.Cash flows from investing activities.
Question
In which section of the statement of cash flows would the purchase of new machinery be included?Cash flows from financing activities.Cash flows from operating activities.Purchases of new equipment items are not included in the statement of cash flows.Cash flows from investing activities.
Solution
The purchase of new machinery would be included in the Cash flows from investing activities section of the statement of cash flows.
Here's why:
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The statement of cash flows is divided into three sections: operating activities, investing activities, and financing activities.
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Operating activities include the cash flows that come from the normal business operations like revenue from selling goods and services and payments made to suppliers.
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Investing activities include cash flows from the purchase and sale of long-term assets, like property, plant, and equipment, and also investments in other businesses.
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Financing activities include cash flows from transactions with the company's owners and creditors, such as issuing stock, paying dividends, or borrowing money.
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The purchase of new machinery is a long-term investment for the company. Therefore, it would be included in the investing activities section of the statement of cash flows.
So, the purchase of new machinery would be included in the Cash flows from investing activities section of the statement of cash flows.
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