Which cash flow activity is financing activities?

• A. Cash receipts from customers.
• B. Purchase of equipment.
• C. Issuance of stock.
• D. Dividends received.

Answer: (C)

The concept being tested is how cash flows are categorized on the cash flow statement. Financing activities are those that involve obtaining or repaying resources from owners and lenders, such as issuing stock, borrowing money, repaying debt, or paying dividends.

Issuing stock fits this category because it brings cash into the company in exchange for ownership interests, increasing both cash and equity. The other options belong to different activity types: cash receipts from customers come from operating activities, the purchase of equipment is an investing activity (spending on long-term assets), and dividends received are generally treated as operating cash flows rather than financing.