Which of the following is a financing activity?

Which of the following is a financing activity?

• A. Issuing stock
• B. Receiving cash interest on a bond
• C. Paying salaries
• D. Purchasing inventory

Answer: (A)

Financing activities are cash flows that come from transactions with owners and creditors to raise or repay capital. Issuing stock fits this, because it brings cash into the company in exchange for ownership shares, increasing equity and providing funds to the business. The other items involve daily operations or investing in assets: receiving cash interest on a bond is typically shown as operating activity (interest income), paying salaries is an operating outflow, and purchasing inventory is part of normal operating activities related to producing and selling goods. So, issuing stock is the financing activity.

Financing activities are cash flows that come from transactions with owners and creditors to raise or repay capital. Issuing stock fits this, because it brings cash into the company in exchange for ownership shares, increasing equity and providing funds to the business. The other items involve daily operations or investing in assets: receiving cash interest on a bond is typically shown as operating activity (interest income), paying salaries is an operating outflow, and purchasing inventory is part of normal operating activities related to producing and selling goods. So, issuing stock is the financing activity.