While preparing Cash Flow Statement, purchase of goodwill is treated as:

The correct option is Investing activity.

While preparing a Cash Flow Statement, the purchase of goodwill is treated as an investing activity because of the following reasons:
1. Nature of Goodwill: Goodwill is an intangible fixed asset. It represents the reputation, brand value, and customer loyalty of a business, which brings future economic benefits.
2. Definition of Investing Activities: Investing activities in a Cash Flow Statement relate to the acquisition and disposal of long-term assets and other investments not included in cash equivalents. This includes both tangible assets (like land, building, and machinery) and intangible assets (like goodwill, patents, and trademarks).
3. Cash Outflow: The purchase of goodwill involves an outflow of cash to acquire a long-term asset that will help generate future revenue for the business.

Therefore, the transaction is classified under Investing activity.