Which of the Following Statements Is True Regarding Cash Flows

question 70

Multiple Choice

Which of the following statements is true regarding cash flows from financing activities?

• A)When companies borrow,cash outflows for financing activities have occurred.
• B)When companies receive dividends,cash inflows from financing activities have occurred.
• C)When companies repurchase their own stock,cash outflows for financing activities have occurred.
• D)When companies pay dividends,cash inflows from financing activities have occurreD.Financing activities include issuing long-term debt (cash inflow),issuing stock (cash inflow),repurchasing their own stock (cash outflow),and paying dividends (cash outflow).A dividend received from investments is an operating activity,not a financing activity.

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Definitions:

Operating Activities

Transactions that relate to the primary operations of a company, such as sales and service provision.

Indirect Method

A cash flow statement approach that adjusts net income for changes in non-cash working capital and other items to calculate operating cash flow.

Cash Flow Classifications

The categorization of cash flows into operating, investing, and financing activities for the purpose of financial reporting and analysis.

Free Cash Flow

The cash a company generates after accounting for cash outflows to support operations and maintain its capital assets.