Question

The activities that result in changes in the size and composition of the owners’ capital and borrowings of the enterprise are called \underline{\hspace{2cm}}.

• A. Operating Activities
• B. Investing Activities
• C. Managerial Activities
• D. Financing Activities

Hint:

Financing activities = Cash flows related to equity capital and long-term borrowings (debt).

Answer 1

The Correct Option is D

Financing activities are those activities that cause changes in the size and structure of the owner's capital (equity) and borrowings (debt) of a firm.
Examples include issue of shares, debentures, raising long-term loans, repayment of loans, and payment of dividends.
Such activities help finance the core operations of the business and affect the capital structure.
Therefore, any inflow from investors or lenders and any outflow to them (like dividend or repayment) are classified under financing activities.
Hence, the correct classification for changes in the owners’ capital and borrowings is Financing Activities.