What will be the treatment of preference shares dividend in cash flow statement when there no additional information is given ?

Question

Answer

Treatment of preference shares dividend in cash flow statement

When no additional information is given, the treatment of preference shares dividend in cash flow statement is as follows:

Preference shares dividend is classified as a cash outflow from financing activities in the cash flow statement.

Preference shares dividend is deducted from the net cash flow from operating activities to arrive at the net cash flow before financing activities.

The net cash flow before financing activities is then adjusted for cash inflows and outflows from financing activities, including the payment of preference shares dividend.

The reason for treating preference shares dividend as a cash outflow from financing activities is that it represents a return on investment to the preference shareholders, who are considered providers of capital to the company. The payment of preference shares dividend is not related to the company's operating activities, which are focused on generating revenue and incurring expenses in the course of business.

It is important to note that the treatment of preference shares dividend in the cash flow statement may vary depending on the specific circumstances of the company and the information provided in the financial statements. For example, if the preference shares are redeemable or convertible, their treatment may differ from non-redeemable or non-convertible preference shares.

Answer

Yes ,it is addede to Np under operating activities

Answer

That dividend will be added to net profit under operating activity or not ????

Answer

Dividends paid are always a financing activity

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