Question

To which activity does the payment of dividend belong?

• A. Operating activity
• B. Investing activity
• C. Financing activity
• D. Bad debts

Hint:

Dividend payment is always reported under financing activities in cash flow statements.

Answer 1

The Correct Option is C

The payment of dividends is treated as a financing activity because it involves decisions related to the company's capital structure and distribution of profits to shareholders. Operating activities relate to business operations and investing activities relate to long-term assets. Dividend payment reduces company reserves and affects equity, which falls under financing decisions. Hence, the correct classification is financing activity.