Which of the Following Transactions Would Not Be Classified as a Financing

question 116

Multiple Choice

Which of the following transactions would not be classified as a financing activity?

• A) Purchase of treasury stock
• B) Payment of dividends
• C) Issuance of bonds at a discount
• D) Purchase of a long-term investment in bonds

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Definitions:

Line of Credit

A Line of Credit is a flexible loan from a bank or financial institution allowing the borrower to draw funds up to a specified limit at any time.

Economic Reasons

Factors or situations related to the structure and functioning of the economy that influence decisions and behaviors.

Holding Cash

The practice of keeping liquid assets on hand for transactional purposes or as a precaution against unforeseen expenses.

Maturity Matching Principle

This principle suggests that the duration of assets and liabilities in a company's portfolio should be aligned, meaning short-term assets should be financed with short-term liabilities, and long-term assets with long-term liabilities.