Borrowing money is an example of:Group of answer choicesan investing activity.a non-cash activity.an operating activity.a financing activity.
Question
Borrowing money is an example of:Group of answer choicesan investing activity.a non-cash activity.an operating activity.a financing activity.
Solution
The correct answer is: a financing activity.
Here's a step-by-step explanation:
-
The statement of cash flows is divided into three sections: operating activities, investing activities, and financing activities.
-
Operating activities include the cash effects of transactions that create revenues and expenses. They generally include transactions in the "income statement items".
-
Investing activities include making and collecting loans and acquiring and disposing of investments (both debt and equity) and property, plant, and equipment.
-
Financing activities, on the other hand, include obtaining resources from owners and providing them with a return on their investment, and borrowing money from creditors and repaying the amounts borrowed.
-
Therefore, borrowing money is an example of a financing activity because it involves obtaining resources from creditors. It is not an operating or investing activity, and it is a cash activity (as it involves the inflow of cash to the company), not a non-cash activity.
Similar Questions
Borrowing money is an example of a/an:Group of answer choicesoperating activity.financing activity.marketing activity.investing activity.
Which of the following is not an example of noncash financing and investing?Multiple ChoicePurchase of equipment by issuing a note payable.Retirement of debt by issuing equity stock.Conversion of preferred stock to common stock.Purchase of a building by issuing equity stock.Purchase of inventory using cash.
Which of the following would not be classified as a financing activity in a statement of cash flows?Group of answer choicesDividends received.Repayment of borrowings.Proceeds from a share issue.Proceeds from borrowings.
Interest:A.is the cost of borrowing money.B.is the additional payment made by borrowers to lenders to convince them to delay their spending.C.depends on the supply and demand for loanable funds.D.is income for the households who loan money through financial intermediaries to firms for capital goods.E.All of these.
Which of the following is an example of a noncash activity?Multiple ChoicePurchase of long-term assets by issuing debtReacquisition of a company's own stockSale of an intangible assetPurchase of investments with cash
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.