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The statement of cash flows for Baldwin Company shows what happens in the Cash account during the year. It can be seen as a summary of the sources and uses of cash (sources of cash are added, uses of cash are subtracted). Please answer which of the following is true if Baldwin repurchases some of its common stock: It is a use of cash, and will be shown in the investing section as a subtraction.
It is a source of cash, and will be shown in the investing section as an addition.
It is a use of cash, and will be shown in the financing section as a subtraction.
It is a source of cash and will be shown in the financing section as an addition

Answer :

Answer:

It is a use of cash, and will be shown in the financing section as a subtraction.

Explanation:

Basically there are three types of activities:

1. Operating activities: It includes those transactions which affect the working capital, and it records transactions of cash receipts and cash payments.

2. Investing activities: It records those activities which include purchase and sale of the fixed assets

3. Financing activities: It records those activities which affect the long term liability and shareholder equity balance.  

So, the repurchase of common stock would be use of cash and same is to be deducted and shown in the financing activities of the cash flow statement

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