Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Dividends and Dividend Preferences

Financial Accounting

12. Stockholders' Equity

Dividends and Dividend Preferences

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Multiple Choice

Which one of the following is subtracted from cash flows from financing activities on the statement of cash flows?

Proceeds from issuing bonds

Issuance of common stock

Receipt of interest income

Payment of cash dividends to shareholders

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Understand the structure of the statement of cash flows, which is divided into three sections: operating activities, investing activities, and financing activities. Financing activities involve transactions related to the company's equity and debt.

Identify the nature of each option provided in the question: 'Proceeds from issuing bonds' and 'Issuance of common stock' are inflows of cash under financing activities, while 'Receipt of interest income' is typically classified under operating activities.

Recognize that 'Payment of cash dividends to shareholders' represents an outflow of cash related to financing activities, as it involves returning funds to equity holders.

Recall that cash flows from financing activities include both inflows (e.g., issuing bonds or stock) and outflows (e.g., repaying debt or paying dividends). Outflows are subtracted from the total cash flows in this section.

Conclude that the correct answer is 'Payment of cash dividends to shareholders,' as it is the only option that represents a subtraction from cash flows in the financing activities section.