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Which of the following would not be classified as a financing activity in a statement of cash flows?Group of answer choicesProceeds from borrowings.Proceeds from a share issue.Dividends received.Repayment of borrowings.

Question

Which of the following would not be classified as a financing activity in a statement of cash flows?Group of answer choicesProceeds from borrowings.Proceeds from a share issue.Dividends received.Repayment of borrowings.

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Solution

The correct answer is: Dividends received.

Here's a step-by-step explanation:

  1. The statement of cash flows is divided into three sections: operating activities, investing activities, and financing activities.

  2. Financing activities include transactions that result in changes in the size and composition of the equity capital or borrowings of the entity. Examples include proceeds from borrowings, proceeds from a share issue, and repayment of borrowings.

  3. However, dividends received would not be classified as a financing activity. Dividends received are typically classified as operating activities because they are returns on investments in other companies and are similar to interest received, which is an operating activity.

  4. Therefore, the statement that "Dividends received" would not be classified as a financing activity in a statement of cash flows is correct.

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