Question

In Cash Flow Statement, ‘interest paid on debentures’ will be shown as ______.

Options

• Operating Activity

• Financing Activity

• Investing Activity

• Both Operating and Financing Activity

Answer 1

In Cash Flow Statement, ‘interest paid on debentures’ will be shown as Financing Activity.

Explanation:

Debentures are instruments used by a company to raise long-term debt capital. Since raising and managing capital alters the size and composition of the company’s equity and borrowings, it is classified as a financing transaction. Therefore, the interest paid on debentures is a direct cost of maintaining that finance and is shown as a cash outflow under Financing Activities.