Which of the following appears as a cash outflow on a statement of cash flows?

• A. Depreciation expense
• B. Payment of dividends to shareholders
• C. Proceeds from sale of equipment
• D. Issuance of common stock

Answer: (B)

Verified step by step guidance

1. Understand the purpose of the statement of cash flows: It categorizes cash inflows and outflows into operating, investing, and financing activities. Cash outflows represent payments made by the company.
2. Analyze each option to determine whether it represents a cash outflow: Depreciation expense is a non-cash item and does not involve actual cash movement, so it does not appear as a cash outflow.
3. Evaluate the payment of dividends to shareholders: Dividends are payments made to shareholders, which involve actual cash outflows. This falls under financing activities in the statement of cash flows.
4. Consider proceeds from the sale of equipment: This represents a cash inflow, not an outflow, and is categorized under investing activities.
5. Assess the issuance of common stock: Issuing stock generates cash inflow for the company, not an outflow, and is categorized under financing activities.