Which of the following is true?
A) An outflow of cash when callable bonds are recalled by the issuer is a financing activity.
B) An outflow of cash for interest payments is an investing activity.
C) An outflow of cash when convertible bonds are converted is an investing activity.
D) Payment of interest is an investing activity since we would not have interest unless we borrowed money or sold bonds to the public.

Question

Quizplus · Accepted Answer

An outflow of cash when callable bonds are recalled by the issuer is a financing activity. Callable bonds are debt securities that can be redeemed by the issuer prior to their maturity date. When a callable bond is called back by the issuer, it results in an outflow of cash for the issuer, which is a financing activity.

Which of the Following Is True