What is an example of a financing activity in a statement of cash flows?

An example of a financing activity in a statement of cash flows is the issuance of bonds. This action involves raising capital for the company by borrowing money from investors, where the company promises to pay back the principal amount along with interest over time. This inflow of cash is categorized as a financing activity because it pertains to how a company raises funds to finance its operations and growth, either by incurring debt or by issuing equity.

The other choices listed represent different types of cash flow activities. The payment of cash for the purchase of machinery is classified as an investing activity since it involves the acquisition of a long-term asset that will be used in the business. The sale of inventory falls under operating activities as it relates to the day-to-day revenue-generating activities of the company. Lastly, the payment of dividends received is considered an operating activity, specifically concerning cash flows derived from the company's core operations. Understanding these classifications helps in accurately analyzing a company's cash flow structure and its financial health.