Dividends received are most commonly classified as an operating activity, but dividends paid are normally classified as a financing activity on the cash flow statement.

Question

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Dividends received are considered as an inflow of cash and are classified as an operating activity because they are earned through the company's normal operations. On the other hand, dividends paid are considered as an outflow of cash and are classified as a financing activity because they are related to the company's capital structure and financing decisions.

Dividends Received Are Most Commonly Classified as an Operating Activity