Classifying Cash Flows
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Classify each of the following business activities as an operating, investing, or financing activity.
1. Acquiring inventory for resale.
2. Buying and selling stocks and bonds of other companies.
3. Selling shares of stock to investors for cash.
4. Selling products or services.
5. Buying property, plant, or equipment.
6. Acquiring and paying for other operating items.
7. Selling property, plant, or equipment.
8. Borrowing cash from creditors.
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Solution Summary
The general concept of categorizing /classifying cash flows is explained. Then, each cash flow is properly categorized with an explanation.
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The statement of cash flows uses three subcategories: operating, investing, and financing. Operating activities tend to involve the cash flows that directly involve the purchase sale of the company's goods and services. Investing activities involve the long-term assets that a company needs to generate the sale of goods and ...
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