Question

Interest received by a finance company is classified under which activity in Cash Flow Statement?

• A. Operating Activity
• B. Investing Activity
• C. Financing Activity
• D. Extraordinary Activity

Hint:

For financial enterprises: \[ \text{Interest received} \rightarrow \text{Operating Activity} \]

Answer 1

The Correct Option is A

Concept: Cash Flow Statement classifies cash flows into:
• Operating Activities
• Investing Activities
• Financing Activities For financial enterprises:
• Interest received is part of main business operations.

Step 1: Understanding operating activities.
Operating activities are principal revenue generating activities of business. For finance companies: \[ \text{Interest received} \] is regular income.

Step 2: Analyzing options.

• Operating Activity — Correct
• Investing Activity — Applicable for non-financial enterprises
• Financing Activity — Related to capital and borrowings
• Extraordinary Activity — Not applicable

Step 3: Write the final answer.
Hence: \[ \boxed{\text{Operating Activity}} \] Therefore, correct option is: \[ \boxed{(A)} \]