Which transaction would typically be classified as an investing activity?

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Multiple Choice

Which transaction would typically be classified as an investing activity?

Explanation:
Long-term asset purchases fall under investing activities because they involve acquiring resources that will be used in the business for more than one year. Buying a building is exactly that kind of asset investment, and it reduces cash in the investing section of the cash flow statement. The other options align with different parts of the cash flow statement: issuing common stock is a financing activity since it affects equity and raises capital; paying cash dividends is also financing because it returns cash to owners; collecting accounts receivable is an operating activity since it stems from day-to-day business operations and closes the receivable from customers.

Long-term asset purchases fall under investing activities because they involve acquiring resources that will be used in the business for more than one year. Buying a building is exactly that kind of asset investment, and it reduces cash in the investing section of the cash flow statement.

The other options align with different parts of the cash flow statement: issuing common stock is a financing activity since it affects equity and raises capital; paying cash dividends is also financing because it returns cash to owners; collecting accounts receivable is an operating activity since it stems from day-to-day business operations and closes the receivable from customers.

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