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What is the treatment of interest and dividends in a cash flow statement for financial enterprises?
- a)Cash flows from interest paid and received are classified as operating activities.
- b)Cash flows from interest paid are classified as financing activities.
- c)Cash flows from interest and dividends received are classified as investing activities.
- d)Dividends paid are classified as financing activities.
Correct answer is option 'A'. Can you explain this answer?
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What is the treatment of interest and dividends in a cash flow stateme...
Classification of Interest and Dividends in Cash Flow Statement for Financial Enterprises
Interest and dividends in a cash flow statement for financial enterprises are treated as follows:
Cash Flows from Interest Paid and Received
- Cash flows from interest paid and received are classified as operating activities.
- Interest paid is considered as an operating expense as it relates to the primary business operations of the financial enterprise.
- Interest received is considered as part of the core revenue-generating activities of the financial enterprise.
Dividends Paid
- Dividends paid by financial enterprises are classified as financing activities.
- Dividends represent a distribution of profits to shareholders and are therefore considered as a financing outflow.
- Dividends paid are not considered as part of the day-to-day operating activities of the financial enterprise.
Overall Impact on Cash Flow Statement
- By classifying interest and dividends in this manner, the cash flow statement provides a clear picture of how these transactions affect the financial position of the enterprise.
- The segregation of cash flows into operating, investing, and financing activities helps stakeholders understand the sources and uses of cash within the business.
In conclusion, the treatment of interest and dividends in the cash flow statement for financial enterprises is crucial for accurate financial reporting and analysis.
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What is the treatment of interest and dividends in a cash flow stateme...
For financial enterprises, cash flows from interest paid and interest and dividends received are classified as operating activities in a cash flow statement. This is because these cash flows are directly related to the principal revenue-producing activities of financial institutions.
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What is the treatment of interest and dividends in a cash flow statement for financial enterprises?a)Cash flows from interest paid and received are classified as operating activities.b)Cash flows from interest paid are classified as financing activities.c)Cash flows from interest and dividends received are classified as investing activities.d)Dividends paid are classified as financing activities.Correct answer is option 'A'. Can you explain this answer?
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