Which of the following is true?
A)An outflow of cash for interest payments is an investing activity.
B)An outflow of cash when convertible bonds are converted is an investing activity.
C)An outflow of cash when callable bonds are recalled by the issuer is a financing activity.
D)Payment of interest is an investing activity since we would not have interest unless we borrowed money or sold bonds to the public.

Question

Quizplus · Accepted Answer

An outflow of cash when callable bonds are recalled by the issuer is a financing activity. This is because the issuer is using cash to pay off the bonds early, which is a financing decision. Option A is incorrect because interest payments are a financing activity. Option B is incorrect because the conversion of convertible bonds is not an outflow of cash. Option D is incorrect because payment of interest is a financing activity, not an investing activity, as it is a cost of borrowing.

Which of the Following Is True