What is an example of a financing activity in the Statement of Cash Flows?

Financing activities in the Statement of Cash Flows primarily involve transactions that affect a company's equity and debt, reflecting how a business raises capital and pays back stakeholders. Issuing stock is a prime example of a financing activity as it represents a direct influx of cash from investors in exchange for ownership equity in the company. This transaction indicates that the company is obtaining funds to finance operations, expand, or invest in future growth.

In contrast, purchasing inventory relates to operating activities, as it reflects the everyday business operations involved in acquiring goods for sale. Paying dividends, while it involves cash flow and affects equity, is more about returning capital to shareholders rather than raising capital. Collecting accounts receivable falls under operating activities, as it pertains to cash inflow from sales that have already been made on credit. Therefore, issuing stock stands out as a clear financing activity by showing how a company raises money through equity financing.