Question

Which of the following are examples of cash flows relating to operating activities? (You may se the box with the question mark to produce a check mark for a correct answer and double c empty the box for a wrong answer. Any boxes left with a question mark will be automatically)

a. Paying rent
b. Purchasing equipment
c. Receiving dividends
d. Receiving interest

Answer 1

Key cash flows related to operating activities include paying rent and potentially receiving interest. Purchasing equipment or receiving dividends are typically not considered operating activities, although there are exceptions for certain types of businesses.

Step-by-step explanation:

The question asks to identify cash flows related to operating activities. The following are examples of such:

• Paying rent: It is a cash outflow relating to the day-to-day operations of a business.
• Purchasing equipment: This is not typically considered an operating activity but rather an investing activity.
• Receiving dividends: Generally, this is considered an investing activity, not an operating activity. However, for financial companies such as banks or investment firms, this might be considered an operating inflow.
• Receiving interest: Interest received can be considered an operating cash inflow for most businesses, especially financial institutions.

In summary, cash flows from operating activities usually involve daily business operations that are not related to the investments or financing of the business. Reinvesting profits could be considered part of operating activities when it is done as a routine business expense.