Final answer:
Issuing stocks to retire a mortgage is reflected in the financing activities section of the cash flow statement, as it converts a debt into equity. It doesn't affect the company's cash flow since the mortgage is retired by exchanging equity, not cash.
Step-by-step explanation:
If a company issues stocks to retire a mortgage, this will be included in the financing activities category of the cash flow statement. The action of issuing stock results in generating capital for the company without the need to repay the borrowed money. Instead, the company gains financial capital for expansion and only needs to be concerned with dividend payouts or reinvesting the profits back into the company.
By issuing stock to retire a mortgage, the company is effectively converting a debt into equity, which will reflect as an inflow in the financing section because it's related to the transactions that fund the business operations and affect the equity or borrowed amount in the business. However, since retiring a mortgage means to pay off a debt, and this payment is not reflected directly in cash due to the exchange being in stock, this transaction does not affect the cash flow from operating activities or investing activities sections.