Which of the following best describes the financing activities section of the statement of cash flows?

• A. It reports cash flows related to borrowing from and repaying principal to creditors and transactions with the company's owners, such as issuing or repurchasing stock and paying dividends.
• B. It reports cash flows from the purchase and sale of long-term assets, such as property, plant, and equipment.
• C. It reports cash flows from the company's core business operations, including receipts from customers and payments to suppliers and employees.
• D. It reports only non-cash investing and financing activities that do not affect cash directly.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the concept of financing activities in the statement of cash flows. Financing activities involve transactions that affect the company's capital structure, such as borrowing, repaying debt, issuing stock, repurchasing stock, and paying dividends.
2. Step 2: Review the options provided in the problem. Each option describes a different section or aspect of the statement of cash flows. Identify which one aligns with the definition of financing activities.
3. Step 3: Eliminate options that describe other sections of the statement of cash flows. For example, cash flows from the purchase and sale of long-term assets are part of investing activities, and cash flows from core business operations are part of operating activities.
4. Step 4: Consider the option that mentions non-cash investing and financing activities. These are disclosed in the notes to the financial statements but are not part of the financing activities section itself.
5. Step 5: Select the option that accurately describes financing activities, focusing on transactions related to borrowing, repaying principal, issuing or repurchasing stock, and paying dividends.