Which of the following would be classified as an operating activity on a statement of cash flows? a. Purchase of inventory. b. Sale of another company's stock. c. Borrowing money through a promissory note. d. Payment of dividends. e. Purchase of a bu (2024)

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Which of the following would be classified as an operating activity on a statement of cash flows? a. Purchase of inventory. b. Sale of another company's stock. c. Borrowing money through a promissory note. d. Payment of dividends. e. Purchase of a bu? ›

Answer and Explanation: The correct answer is option a. Purchase of inventory. The purchase & sale of inventory is categorized as an operating activity because it belongs to the core operations of the firm.

This is because inventory is a key component of a company's operations, and purchasing it directly supports the generation of revenue. On the other hand, the sale of land, purchase of land, and payment of dividends are not classified as operating activities.

Operating activities are all the things a company does to bring its products and services to market on an ongoing basis. Non-operating activities are one-time events that may affect revenues, expenses or cash flow but fall outside of the company's routine, core business. Operating activities include: Setting a strategy.

The cash flow from operating activities depicts the cash-generating abilities of a company's core business activities. It typically includes net income from the income statement and adjustments to modify net income from an accrual accounting basis to a cash accounting basis.

Purchase of inventory is an operating activity. Inventory is a current asset, and any change in the current asset is reported under cash flow from operating activity.

Some common operating activities include cash receipts from goods sold, payments to employees, taxes, and payments to suppliers. These activities can be found on a company's financial statements and in particular the income statement and cash flow statement.

Operating activities. include cash activities related to net income. For example, cash generated from the sale of goods (revenue) and cash paid for merchandise (expense) are operating activities because revenues and expenses are included in net income.

Cash paid for rent is reported as an operating activity. Cash contributed to the business by an owner is an investing activity. Cash paid on a long-term note payable is a financing activity.

What are operating activities? Operating activities are the types of activities the company performs to generate profits. What are investing activities? Investing activities include the purchase or sale of long-lived assets used in operating the business, or the purchase or sale of investment securities.

What are operational activities in cash flow statement? ›

Operating activities: Operating activities are those cash flow activities that either generate revenue or record the money spent on producing a product or service. Operational business activities include inventory transactions, interest payments, tax payments, wages to employees, and payments for rent.

Operating cash flow is the part of the cash flow statement that shows how much money a business earns from typical operations. It's calculated as revenue minus operating expenses. Operating cash flow represents a company's overall ability to turn a profit.

Cash flow from operating activities does not include the cash spent or generated via investing activities, such as buying or selling assets, or via financing activities, which include both debt and equity.

Answer and Explanation: When a company sells a piece of equipment, the actual cash received for this would be recorded in the investing section of the statement of cash flows. If there is a gain or a loss, this is recorded in the operating section.

An operating expense is any expense that is incurred in the course of running a business. This would include the cost of inventory, as well as other expenses such as rent, utilities, and payroll.

The operating activities section of the statement of cash flows focuses on the cash inflows and outflows related to the company's main business activities, such as revenues, expenses, and working capital changes.

The correct answer is c.

They include operating, investing, and financing activities. Income activities, on the other hand, are not included in the statement of cash flows but in the income statement, also known as the statement of profit or loss.

For example, retiring long-term debt by issuing common stock is a noncash financing activity. Other example of noncash investing and financing activities include: acquiring land by issuing common stock, purchasing a building by issuing a note payable, acquiring equipment in exchange for land, etc.