Which of the following cash flows results from a financing activity?

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BlackTom AI · Accepted Answer

Start by identifying what constitutes a financing activity in a cash flow statement. Financing activities involve transactions with owners and creditors that affect equity and borrowings, such as issuing debt, repaying debt, issuing stock, repurchasing stock, and paying dividends.
Option a: 'Receive loan from NAB' represents obtaining funds through borrowing, which increases liabilities and cash. This is a classic example of a financing activity because it relates to a creditor transaction that changes the capital structure.
Option b: 'All options are cash flows from financing activities' would be true only if every listed option were a financing activity. Since some options involve other classifications, this statement should be evaluated against the actual nature of each item.
Option c: 'Interest on loan paid to NAB' is typically classified differently depending on the accounting framework. Under many standards, interest paid is considered an operating activity (the cost of borrowing relates to day-to-day operations). In some frameworks, it can be shown as financing, but the common classification is operating, making this option not a straightforward financing cash flow.
Option d: 'Owner took some inventory for personal use' reflects a non-cash or non-financing impact on equity and inventory. Such owner withdrawals affect equity and asset levels but do not represent a financing activity like borrowing, repaying debt, or issuing equity. It is neither a financing cash flow nor a typical operating cash flow in most standard classifications, and it would more likely be accounted for within owner’s equity adjustments or inventory draw-downs rather than financing.
Considering these classifications, the item that clearly aligns with financing activities is the cash inflow from borrowing. The other options either describe non-financing activities or rely on classifications that do not fit financing activities in standard cash flow categorization.

MCD2150 Accounting for Managers - Trimester 2 - 2025

Which of the following cash flows results from a financing activity?

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