How is the purchase of treasury stock classified in the statement of cash flows?

The purchase of treasury stock is classified as a financing activity in the statement of cash flows because it directly relates to the financing structure of the company. Treasury stock is essentially the company's own shares that have been repurchased from shareholders. This transaction reflects the company's efforts to manage its own equity, which is a key component of financing activities.

Financing activities include transactions that affect a company’s equity and long-term liabilities, such as issuing or repurchasing stock, borrowing, and repaying debt. In this context, repurchasing shares reduces the amount of outstanding equity, thus it falls under financing activities.

In contrast, operating activities generally encompass the day-to-day functions of the business, such as revenues and expenses from core operations, while investing activities relate to the acquisition or sale of long-term assets. Non-cash activities refer to transactions that do not involve cash movement, which is not applicable in this case since the purchase of treasury stock does involve cash expenditure.