Question

In a statement of cash flows, interest payments to lenders and other creditors should be classified as cash outflows for a. operating activities. b. borrowing activities. c. lending activities. d. financing activities.

Answer 1

The correct answer is letter "A": operating activities.

Step-by-step explanation:

Operating Activities are the daily processes conducted by a company to generate income. They pertain to the company's core business activity such as sales and manufacturing and they provide most of the cash flow that determines whether a business is profitable.

When it comes to the Financial Statements the situation is not different. Interest payments to lenders and other creditors can be part of the day to day activity of a company. That is the reason why they are recorded in the operating activities section.