Question

Which of the following should be included in calculating net cash flows from operating activities?

a. Cash proceeds from sales.
b. Cash received from an issuance of bonds.
c. Cash used for purchases of equipment.
d. Dividends paid to shareholders.

Answer 1

The correct item to include when calculating net cash flows from operating activities is cash proceeds from sales, as this reflects income from the company's main operations.

Step-by-step explanation:

When calculating net cash flows from operating activities, the inclusion should be primarily the cash that reflects the company's core business operations. The correct answer is a. Cash proceeds from sales, as these are the inflows from the company's main business activities. Options b, c, and d include cash received from an issuance of bonds, cash used for purchases of equipment, and dividends paid to shareholders, respectively. These are associated respectively with financing activities, investing activities, and again financing activities, but not with operating activities.