Which of the following is a cash outflow from investing activities on the statement of cash flows?

• A. Purchase of equipment
• B. Repayment of bank loans
• C. Payment of dividends
• D. Payment to suppliers for inventory

Answer: (A)

Verified step by step guidance

1. Understand the classification of cash flows: The statement of cash flows categorizes cash flows into three main activities: operating, investing, and financing. Investing activities typically involve transactions related to the acquisition or disposal of long-term assets.
2. Identify the nature of each option: Analyze each option to determine whether it relates to investing activities. For example, purchasing equipment is a transaction involving a long-term asset, which is classified under investing activities.
3. Classify repayment of bank loans: Repayment of bank loans is a financing activity because it involves the settlement of debt obligations.
4. Classify payment of dividends: Payment of dividends is also a financing activity, as it represents a return to shareholders.
5. Classify payment to suppliers for inventory: Payment to suppliers for inventory is an operating activity because it relates to the day-to-day operations of the business.