The payment of cash dividends to shareholders can be classified as an operating or a financing activity.

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The payment of cash dividends to shareholders is typically classified as a financing activity in the cash flow statement, reflecting how it is a distribution of profits to owners. However, in some financial reporting frameworks outside of the U.S. GAAP, such as the International Financial Reporting Standards (IFRS), there can be flexibility allowing for classification under either operating or financing activities based on the entity's policy.

The Payment of Cash Dividends to Shareholders Can Be Classified