Cash outflows for payment of cash dividends is an example of:
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A. B. C. D.C
Providing stockholders with a return on their investment in the form of a cash dividend is a financing activity.
The correct answer is B. cash flows from financing activities.
Cash outflows for payment of cash dividends represent a distribution of profits to the shareholders of a company. It is considered a financing activity because it involves the payment of cash to investors who have provided capital to the company.
Cash flows from operating activities (option A) pertain to the cash flows directly related to the core operations of a business. This includes cash inflows from sales, cash outflows for payments to suppliers and employees, and other expenses incurred in running the day-to-day operations. Payment of cash dividends is not directly related to the operating activities of the business.
Cash flows from noncash investing and financing activities (option C) include transactions that do not involve the exchange of cash, such as the acquisition of assets through issuing shares or debt. Payment of cash dividends involves the outflow of cash, so it does not fall under this category.
Cash flows from investing activities (option D) typically include the purchase or sale of long-term assets, such as property, plant, and equipment or investments in other companies. Payment of cash dividends is not related to the acquisition or disposal of such assets, so it is not considered a cash flow from investing activities.
Therefore, the most appropriate categorization for cash outflows for payment of cash dividends is cash flows from financing activities (option B), as it represents the distribution of profits to the shareholders and involves the payment of cash to investors.