Multiple Choice
Which of the following is something you could find using the statement of cash flows?
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13. Statement of Cash Flows
Introduction to the Statement of Cash Flows
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Which of the following appears as a cash outflow on a statement of cash flows?
A
Depreciation expense
B
Payment of dividends to shareholders
C
Proceeds from sale of equipment
D
Issuance of common stock
Verified step by step guidance1
Understand the purpose of the statement of cash flows: It categorizes cash inflows and outflows into operating, investing, and financing activities. Cash outflows represent payments made by the company.
Analyze each option to determine whether it represents a cash outflow: Depreciation expense is a non-cash item and does not involve actual cash movement, so it does not appear as a cash outflow.
Evaluate the payment of dividends to shareholders: Dividends are payments made to shareholders, which involve actual cash outflows. This falls under financing activities in the statement of cash flows.
Consider proceeds from the sale of equipment: This represents a cash inflow, not an outflow, and is categorized under investing activities.
Assess the issuance of common stock: Issuing stock generates cash inflow for the company, not an outflow, and is categorized under financing activities.
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