Final answer:
Notes Payable to banks are typically classified as financing (F) activities on a cash flow statement, not operating activities, because they relate to the financing of the company rather than day-to-day operations.
Step-by-step explanation:
To determine whether current assets or liabilities belong to operating (O), investing (I), or financing (F) activities, we look at the context in which they are used within a business. For Notes Payable to banks, which are the focus of the question asked, they are typically classified as financing (F) activities. Financing activities on a cash flow statement reflect the transactions related to a company's debt or equity financing, hence notes payable, being a form of debt, fall under this category.
When adjusting net income to arrive at cash flow from operating activities, operating accounts such as accounts receivable, accounts payable, and inventory are considered, as they are directly related to the company's core business operations. Changes in notes payable involve borrowing or repaying borrowed funds, which are related to the financing of the company's operations rather than its day-to-day operations. Therefore, notes payable is not an operating account but a financing activity.