Purchases of Marketable Securities

B

The purchase of investment securities is clearly an investing cash flow.

Purchases of marketable securities can be categorized as investing cash flows.

Investing cash flows are cash flows related to the acquisition or disposal of long-term assets and investments, including marketable securities. Marketable securities are financial instruments that are easily bought and sold on public exchanges, such as stocks and bonds.

When a company purchases marketable securities, it is typically making an investment with the intention of earning a return. This investment is considered a long-term asset and falls under the category of investing activities in the statement of cash flows.

Operating cash flows, on the other hand, are cash flows directly related to a company's core business operations, such as revenue from sales, payment of wages, and purchase of inventory. Purchases of marketable securities do not directly relate to the day-to-day operations of the business, so they are not considered operating cash flows.

Financing cash flows involve activities related to raising or repaying funds to finance the operations or growth of a business. Examples include issuing or repurchasing shares, issuing or repaying debt, and payment of dividends. Purchases of marketable securities do not involve raising or repaying funds through external sources, so they are not considered financing cash flows.

Therefore, purchases of marketable securities are classified as investing cash flows because they represent the acquisition of long-term assets and investments, which is one of the main activities included in the investing activities section of the statement of cash flows.