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In a statement of cash flows, payments of dividends are classified as: Multiple Choice Costs and...

In a statement of cash flows, payments of dividends are classified as:

Multiple Choice

  • Costs and Expenses.

  • Financing activities.

  • Operating activities.

  • Investing activities.

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Answer #1

Answer

--Correct Answer = Option #2: Payments of cash dividend are classified as "FINANCING ACTIVITIES"

--Stockholders provide FINANCE to the company by investing in common/preferred stock.

--Payments made to these stockholders in the form of dividend is treated as Cash Outflow under Financing activities.

--Payment of Dividend is NOT an operating activities as it is different from the general operational activities of the business.

--Payment of dividend cannot be classified as Investment activities BECAUSE its not an investment in fixed assets or long term investments.

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