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      Question

      How are advances and loans made by a financial

      institution classified in cash flow statement?
      A Operating activity Correct Answer Incorrect Answer
      B Investing activity Correct Answer Incorrect Answer
      C Financing activity Correct Answer Incorrect Answer
      D Non-operating activity Correct Answer Incorrect Answer
      E Direct activity Correct Answer Incorrect Answer

      Solution

      For financial institutions like banks, providing loans and advances is a part of their ordinary business operations. Therefore, in the cash flow statement, when a financial institution gives out loans or advances, it is typically classified as an operating activity, as this is central to the core business model of such institutions.

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