Series 79 practice questioneasyFinancial Statement Analysis
On the statement of cash flows, the purchase of property, plant, and equipment (PP&E) is classified under which section?
- AOperating activities
- BInvesting activities✓ Correct answer
- CFinancing activities
- DNon-cash supplemental disclosures
Explanation
Why B — Investing activities
Capital expenditures such as the purchase of PP&E are classified under investing activities on the statement of cash flows. Operating activities cover day-to-day business operations, while financing activities include debt issuance, equity issuance, and dividends. Understanding cash flow classification is essential for accurately calculating free cash flow and analyzing how a company allocates capital.
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