In the statement of cash flows, issuing notes payable for borrowing is classified as which type of activity?

In the statement of cash flows, issuing notes payable for borrowing is classified as a financing activity because it involves transactions that affect the company's capital structure. Financing activities include obtaining resources from creditors and repaying them, as well as obtaining capital from owners and distributing funds to them. When a company issues notes payable, it is essentially borrowing money, which increases its liabilities and provides cash. This activity directly relates to the funding of the business operations and is crucial for assessing how a company manages its capital, making it a pivotal part of the financing section of the cash flow statement.

Operating activities, on the other hand, relate to the day-to-day functions of the business, such as sales and expenses. Investing activities involve the acquisition and disposal of long-term assets and investments. Non-cash activities concern transactions that do not involve cash flow but may still impact the financials, such as asset exchanges or debt restructuring. Therefore, the classification as a financing activity accurately reflects the nature of the transaction regarding external funding.