Which section of the cash flow statement shows financing activities such as borrowing and equity changes?

• A. Financing activities
• B. Operating activities
• C. Investing activities
• D. Tax activities

Answer: (A)

The main idea here is that the cash flow statement groups cash movements by how they affect the company’s capital structure. The financing activities section tracks how the company raises and returns money to investors and lenders. This includes borrowing money and repaying debt, issuing or repurchasing shares, and paying dividends. These activities show changes in the company’s financing and equity, not its everyday operations or asset purchases.

Operating activities cover day-to-day business cash flows, such as cash received from customers and cash paid to suppliers and employees, with adjustments for non-cash items. Investing activities involve purchases and sales of long-term assets and investments. Taxes are typically reflected within operating activities rather than in a separate financing section.

So the section that shows borrowing and equity changes is the financing activities section.