Which of the following cash flows results from a financing activity?
A)Purchasing an automobile by borrowing money from the bank
B)Receiving a cash dividend on an investment in another company
C)Declaring a stock dividend on common stock
D)Issuing 1,000 shares of preferred stock

Question

Quizplus · Accepted Answer

Issuing preferred stock is a financing activity because it involves raising funds from investors in exchange for ownership in the company. A) involves a cash inflow from a financing activity, but also a cash outflow from an investing activity (purchasing the automobile). B) involves a cash inflow from an investing activity (receiving a dividend) and C) involves a stock dividend which is a distribution of equity to existing shareholders, and is not a financing activity.

Which of the Following Cash Flows Results from a Financing