Final answer:
The issuing of new common stock for $50,000 by Cardinal Company is considered a financing activity in the statement of cash flow, reflecting how companies typically raise capital. Option 3 is correct.
Step-by-step explanation:
When the Cardinal Company issues new common stock for $50,000, the transaction is considered a financing activity on the statement of cash flow. This is because the transaction involves raising capital through the sale of equity in the company, a process that reflects how companies access financial capital to fund their operations, invest in new projects, or refinance debt. Various options are available for a firm to access financial capital, such as borrowing from a bank, issuing bonds, or issuing stock. Issuing stock has the trade-off of reducing ownership control, as the company shares this with the new public shareholders, but it also does not commit the firm to fixed interest payments like debt financing would.