Net Cash Used in Investing Activities | CFA® Level 1 Exam Answer

Net Cash Used in Investing Activities

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Question

Swiss Inc. had the following activities during 1996:

Acquired 2,000 shares of stock in Molly Inc. for $26,000.

Sold an investment in General Motors for $35,000 when the carrying value was $33,000.

Acquired a $50,000, 4-year certificate of deposit from a bank. (During the year, interest of $3,750 was paid to Swiss.)

Collected dividends of $1,200 on stock investments.

In Swiss's 1996 statement of cash flows, net cash used in investing activities should be ________.

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A. B. C. D. E.

C

Investing activities include the acquisition and disposal of all long-term assets. Thus, the purchase of shares, sale of shares held as an investment, acquisition of long-term certificate of deposit (not a cash equivalent since long-term) are classified as investing activities and total $41,000 used (-$26,000 +35,000 - 50,000).

The receipts of dividends and interest are cash flows from operating activities.

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