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

13. Statement of Cash Flows

Introduction to the Statement of Cash Flows

Financial Accounting

13. Statement of Cash Flows

Introduction to the Statement of Cash Flows

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Multiple Choice

Which of the following best describes the financing activities section of the statement of cash flows?

It reports cash flows from the purchase and sale of long-term assets, such as property, plant, and equipment.

It reports cash flows related to borrowing from and repaying principal to creditors and transactions with the company's owners, such as issuing or repurchasing stock and paying dividends.

It reports cash flows from the company's core business operations, such as receipts from customers and payments to suppliers.

It reports only non-cash investing and financing activities.

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Verified step by step guidance

Step 1: Understand the purpose of the financing activities section of the statement of cash flows. This section focuses on transactions that affect the company's capital structure, including borrowing, repaying debt, issuing stock, repurchasing stock, and paying dividends.

Step 2: Differentiate financing activities from other sections of the statement of cash flows. For example, investing activities involve the purchase and sale of long-term assets, while operating activities involve the company's core business operations, such as receipts from customers and payments to suppliers.

Step 3: Recognize that the financing activities section does not report non-cash transactions directly. Non-cash investing and financing activities are disclosed separately in the notes to the financial statements or in a supplementary schedule.

Step 4: Review the options provided in the problem and identify the one that aligns with the definition of financing activities. Look for keywords such as 'borrowing,' 'repaying principal,' 'issuing stock,' 'repurchasing stock,' and 'paying dividends.'

Step 5: Confirm that the correct answer is the one describing cash flows related to borrowing from and repaying principal to creditors and transactions with the company's owners, such as issuing or repurchasing stock and paying dividends.