Which of the following activities come under the head of 'financing activities'?

A) Purchase of shares
B) Dividend payable on equity shares
C) Issue of 9% debentures
D) Redemption of preference shares
E) Interest paid on debentures

Choose the correct answer from the options given below.

C, D & E only

The correct answer is option 3- C, D & E only.

A) Purchase of shares- Investing activity

B) Dividend payable on equity shares- It is outstanding so not shown in cash flow statement. Dividend payable on equity shares is not treated as a financing activity in the Cash Flow Statement because it does not involve any actual movement of cash. It only represents an obligation or liability that arises when a dividend is declared but has not yet been paid. The Cash Flow Statement records only real cash inflows and outflows, not outstanding amounts. Therefore, dividend payable is excluded. However, when the dividend is actually paid, it results in a cash outflow and is then classified as a financing activity, as it relates to the distribution of profits to shareholders.

C) Issue of 9% debentures- Financing activity

D) Redemption of preference shares- Financing activity

E) Interest paid on debentures- Financing activity

Financing activities center around the management of long-term funds or capital within an enterprise. These activities involve actions such as acquiring or repaying capital and borrowings. These financial activities can significantly impact the size and structure of the owners' capital and liabilities.
Cash Inflows from Financing Activities:
* Receipt of cash resulting from the issuance of equity shares.
* Receipt of cash from issuing debentures, loans, bonds, and other short or long-term borrowings.
Cash Outflows from Financing Activities:
* Cash repayments made to settle borrowed amounts.
* Cash payments of interest on debentures and long-term loans.
* Cash dividends distributed on both equity and preference capital.