Question

Which of the following items is not considered an operating cash flow in the statement of cash flows?

a) Dividends paid to stockholders.
b)Cash received from customers.
c)Interest paid to creditors.
d)Cash paid for salaries.

Answer 1

Dividends paid to stockholders are not considered an operating cash flow but rather a financing activity in the statement of cash flows.

Step-by-step explanation:

The main answer to your query about which item is not considered an operating cash flow in the statement of cash flows is dividends paid to stockholders.Explanation in more than 100 words: The statement of cash flows classifies cash transactions into three categories: operating activities, investing activities, and financing activities. Operating activities include the day-to-day transactions that relate to running the business, such as cash received from customers, interest paid to creditors, and cash paid for salaries. These items reflect the core business operations. On the other hand, dividends paid to stockholders are considered a financing activity, as they pertain to the reward given to owners of the company for their investment. The logic behind this classification stems from the fact that paying dividends is not part of the everyday operations but rather a decision on how to allocate profits after operational expenses have been covered.Conclusion: Remember, dividends are related to the distribution of profits and reflect a financing activity rather than an operating cash flow.