Question

Which of the following transactions will result in ‘Cash Flows from Operating Activities’?

Options

• Purchase of Inventory

• Payment of Dividend

• Purchase of Property

• Issue of Debentures

Answer 1

Purchase of Inventory

Explanation:

The Purchase of Inventory is directly linked to the core, day-to-day business operations required to manufacture or sell goods, making it a regular Operating Activity. On the other hand, the Purchase of Property involves buying long-term fixed assets, which falls under Investing Activities. Lastly, both the Payment of Dividend and the Issue of Debentures are related to managing the company’s capital structure and raising debt, classifying them both as Financing Activities.