Which transaction is normally classified as a financing cash flow in a cash flow statement?
Correct answer: C. Issue of ordinary shares for cash
- A. Purchase of inventory for cash
- B. Payment of wages to employees
- C. Issue of ordinary shares for cash
- D. Receipt of cash from customers
Explanation
Issuing ordinary shares brings finance into the business from its owners, so it is a financing cash flow. Inventory purchases, wages, and customer receipts are normally operating cash flows.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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