Question

Which of the following does not represent an outflow of cash and therefore would not be reported on the statement of cash flows as a use of cash?

• A. Purchase of non-current assets
• B. Purchase of treasury stock
• C. Discarding an asset that had been fully depreciated
• D. Payment of cash dividends

Answer 1

Answer: (C)

Discarding an asset that had been fully depreciated

The total outgoing funds from a company in a given period of time. Cash outflows include expenses such as salaries, supplies, and maintenance as well as paying dividends or servicing any debt held by the company.

A company may be required to seek additional financing if cash outflows exceed cash inflows.

Examples of cash outflow are - Cash payments to suppliers for goods and services, cash payments to acquire fixed assets including intangibles, cash payments to acquire share warrants or debt instruments of other enterprises, Dividends paid on equity and preference capital, interest paid on loans, debentures and advances.