Question

The declaration of dividends by the board of directors would be reported on a statement of cash flows as a(an):

a) Activity that would not be reported on a statement of cash flows
b) Cash inflow under the Financing Activities
c) Cash outflow under the Financing Activities
d) Cash outflow under the Investing Activities

Answer 1

The declaration of dividends by the board of directors is reported as a cash outflow under the Financing Activities on a statement of cash flows, indicating a distribution of profits to shareholders.

Step-by-step explanation:

The declaration of dividends by the board of directors would be reported on a statement of cash flows as a cash outflow under the Financing Activities. When a company declares dividends, it is essentially deciding to distribute a portion of its profits to its shareholders. Given that this process involves the outflow of cash from the company to its owners, it is classified under financing activities because it relates to transactions that affect the equity of the company. Dividends are not associated with the company's investment in capital assets nor its operational activities, and therefore do not fall under investing or operating activities on the statement of cash flows.

Answer 2

The declaration of dividends by the board of directors is reported as a cash outflow under the Financing Activities on a statement of cash flows, indicating a distribution of profits to shareholders.

Step-by-step explanation:

The declaration of dividends by the board of directors would be reported on a statement of cash flows as a cash outflow under the Financing Activities. When a company declares dividends, it is essentially deciding to distribute a portion of its profits to its shareholders. Given that this process involves the outflow of cash from the company to its owners, it is classified under financing activities because it relates to transactions that affect the equity of the company. Dividends are not associated with the company's investment in capital assets nor its operational activities, and therefore do not fall under investing or operating activities on the statement of cash flows.