Loans made to outside parties would be classified into which of the following categories for the purpose of disclosure in the statement of cash flows?

Question

Quizplus · Accepted Answer

Loans made to outside parties are considered as investing activities as they represent the acquisition or disposal of long-term assets or other investments that are not considered to be cash equivalents. The statement of cash flows categorizes cash inflows and outflows into three categories: operating activities, investing activities, and financing activities. Operating activities include cash inflows and outflows from day-to-day operating activities of the business. Financing activities include cash inflows and outflows from sources of financing, such as debt and equity. Investing activities include cash inflows and outflows from purchases and sales of long-term assets and other investments. Loans made to outside parties fall under the category of investing activities as they represent the acquisition of long-term assets.

Loans Made to Outside Parties Would Be Classified into Which