Question

Which of the following are operating activities for the purpose of preparing a cash flow statement?

1. Cash payments to suppliers for goods and services.
2. Dividend received from investments in other enterprises.
3. Cash receipts from royalties, fees, commissions, and other revenues.
4. Cash repayments of amounts borrowed.

Options

• (i), (ii), and (iii)

• (i) and (iii)

• (i), (iii) and (iv)

• (iii) and (iv)

Answer 1

(i) and (iii)

Explanation:

• Statements (i) and (iii) are operating activities because payments to suppliers and receipts from royalties or fees are part of regular, daily business operations.
• Statement (ii) is an investing activity because the dividend received is income earned from investments made in other companies.
• Statement (iv) is a financing activity because the repayment of borrowed amounts changes the long-term liabilities of the business.

Therefore, only (i) and (iii) are operating activities.