Question

What are the three primary sections of the statement of cash flows? In what section would the payment of a cash dividend be shown?

Short answer

The three primary sections of the statement of cash flow are as follows:

1. Cash flow from operating activities
2. Cash flow from investing activities
3. Cash flow from financing activities

And the cash dividend is shown under cash flow from financing activities.

Step-by-step solution

Cash flow from operating activities

Cash flow from operating activity shows the movement of cash in the organization due to its operating activities,such as buying or selling goods and services.

Cash flow from investing activities

Cash flow from investing activity shows the cash inflow and outflow relating to the investment activities in the organization, such as the buying of fixed assets, investment, etc.

Cash flow from financing activities

Cash flow from financing activity shows the cash inflow and outflow relating to the funds used by the organization,such as the issuing of equity shares, debentures, etc. The payment of cash dividends is also reflected in this section.