Which cash flow activity is part of investing activities?

Which cash flow activity is part of investing activities?

• A. Cash flows from issuing stock
• B. Cash flows from repaying debt
• C. Cash flows from sale or acquisition of fixed assets
• D. Cash flows from paying dividends

Answer: (C)

Investing activities cover changes in long-term assets and investments. Buying or selling fixed assets like equipment or a building directly affects the company’s productive capacity and long-term asset base, so cash flows from the sale or acquisition of fixed assets are categorized as investing activities. In contrast, financing activities relate to how the company funds itself and returns capital to investors, such as issuing stock (increasing equity), repaying debt (reducing liabilities), or paying dividends.

Investing activities cover changes in long-term assets and investments. Buying or selling fixed assets like equipment or a building directly affects the company’s productive capacity and long-term asset base, so cash flows from the sale or acquisition of fixed assets are categorized as investing activities.

In contrast, financing activities relate to how the company funds itself and returns capital to investors, such as issuing stock (increasing equity), repaying debt (reducing liabilities), or paying dividends.