Fine Garments Ltd. is engaged in the export of readymade garments. The company purchased a machinery of Rs. 10,00,000 for the use in packaging of such garments. State giving reason whether the cash flow due to the purchase of machinery will be cash flow from operating activities, investing activities or financing activities?

SOLUTION

Investing Activity. Because Fine Garments L.td. has purchased the machinery for use in the business not for sale.