A company's transactions with its creditors to borrow money and/or to repay the principal amounts of both short- and long-term debt are reported as cash flows from:
A) Investing activities.
B) Direct activities.
C) Operating activities.
D) Indirect activities.
E) Financing activities.

Question

Quizplus · Accepted Answer

Cash flows related to borrowing and repayment of short- and long-term debt are classified as financing activities, as they involve the issuance and repayment of the company's own securities (i.e. debt). Financing activities also include transactions related to equity (i.e. issuance and repurchase of stock) and payment of dividends.

A Company's Transactions with Its Creditors to Borrow Money And/or