The purchase of additional equipment needed for current production is classified on the statement of cash flows as an investing. Investing activities are those activities that the company undertakes to generate a future profit, or return, such as purchasing fixed assets.
An increase in cash resulting from the issuance of previously authorized common stock is classified on the statement of cash flows as a financing activity. Financing activities are the activities that a company undertakes to raise capital to finance the business, and issuing stock raises capital to finance the business.
Operating activities are generally part of the company's main business activities and central operations. These are essentially items that generate revenues and expenses. When accounts payable decreases, it means cash has been disbursed for operating activities. Thus a decrease in accounts payable during the year should be classified as an operating activity on the statement of cash flows.
The payment of a cash dividend is classified on the statement of cash flows as a financing activity, regardless of where the money to pay the dividend came from. Financing activities are the activities that a company undertakes to raise capital to finance the business, and paying a cash dividend is a financing activity.
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