Dividend paid by a Trading company is classified under which kind of activity while preparing cash flow statement?

Cash Flow from Financing Activities

The correct answer is option 3- Cash Flow from Financing Activities.

In case of a financial enterprise (whose main business is lending and borrowing), interest paid, interest received and dividend received are classified as operating activities while dividend paid is a financing activity. In case of a non-financial enterprise, as per AS-3, it is considered more appropriate that payment of interest and dividends are classified as financing activities whereas receipt of interest and dividends are classified as investing activities.