Asked by marlena oxendine on May 13, 2024
Verified
Cash paid for preferred stock dividends should be shown on the statement of cash flows under
A) investing activities
B) financing activities
C) noncash investing and financing activities
D) operating activities
Preferred Stock
A type of stock that offers dividends at a fixed rate and has priority over common stock in the distribution of assets during a company's liquidation.
Statement Of Cash Flows
A report detailing the movements in cash and cash equivalents due to variations in the balance sheet positions and income, segmented by operations, investments, and financing actions.
Investing Activities
Transactions involving the acquisition or disposal of non-current assets, such as property, plant, and equipment or investment securities.
- Understand the division of cash flow activities into operating, investing, and financing, along with the specific transactions affiliated with each type.
- Understand the reporting of cash dividends and their classification in the Statement of Cash Flows.
Verified Answer
AR
alissa rubioMay 18, 2024
Final Answer :
B
Explanation :
Cash paid for preferred stock dividends is considered a financing activity because it involves payments made to investors who have provided financing to the company in the form of preferred stock. It is not an operating activity because it does not directly relate to the day-to-day operations of the business, nor is it a noncash investing and financing activity because it involves actual cash payments.
Learning Objectives
- Understand the division of cash flow activities into operating, investing, and financing, along with the specific transactions affiliated with each type.
- Understand the reporting of cash dividends and their classification in the Statement of Cash Flows.