Which of the following would be classified in cash flow from financing activities?

• A. Proceeds from issuing debt
• B. Proceeds from selling equipment
• C. Interest received
• D. Income taxes paid

Answer: (A)

Financing activities are flows that affect the company’s capital structure—borrowing from lenders, repaying debt, issuing or repurchasing stock, and paying dividends. When a company issues debt, it receives cash from lenders and increases its liabilities, which is exactly a financing activity because it changes how the company finances its operations. In contrast, selling equipment involves disposing of a long-term asset (an investing activity), while interest received and income taxes paid are typically shown as operating activities. So the cash inflow from issuing debt fits squarely in financing activities.