Question

Which of the following transactions will result in outflow of cash?

Options

• Cash payments to and on behalf of the employees.

• Cash receipts from royalties.

• Issue of shares.

• Dividend received from investments in other enterprises.

Answer 1

Cash payments to and on behalf of the employees.

Explanation:

Paying employees requires the company to spend money, which creates an external cash outflow (under Operating Activities). On the other hand, cash receipts from royalties, issuing shares to raise capital, and receiving dividends from investments all bring money into the business, making them cash inflows.