Identify the activity that results in cash flow from financing activities.
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Interest paid on debentures
Financing activities change the size and make-up of the owners’ capital and borrowings. For a company that is not a financial enterprise, interest paid on debentures is a cost of borrowed funds, so it is a financing outflow.
Option (1) Interest received in cash from loans and advances — Incorrect. Interest received on loans and advances is an investing inflow.
Option (2) Conversion of debentures into shares — Incorrect. Conversion of debentures into shares involves no cash, so it does not appear in the cash flow statement.
Option (3) Cash payments for insurance premiums — Incorrect. Insurance premiums paid are operating expenses, an operating outflow.
NCERT (2026-27 edition):
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