Cash outflows for payment of cash dividends is an example of:
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A. B. C. D.A
Providing stockholders with a return on their investment in the form of a cash dividend is a financing activity.
Cash outflows for payment of cash dividends is an example of cash flows from financing activities.
Cash flows from financing activities include transactions and events that involve obtaining or repaying capital, such as issuing or repurchasing equity shares, taking on or repaying debt, and distributing dividends to shareholders.
When a company pays cash dividends to its shareholders, it is distributing a portion of its earnings or accumulated profits back to the owners of the business. This payment represents a cash outflow, as it reduces the company's cash reserves. The payment of dividends is considered a financing activity because it involves the distribution of funds to the providers of capital, the shareholders.
It is important to note that cash dividends are different from stock dividends or stock splits, which are non-cash transactions and fall under the category of noncash investing and financing activities. Cash dividends involve the actual distribution of cash to shareholders, resulting in a direct cash outflow.
Therefore, the correct answer is:
A. Cash flows from financing activities.