DECA Financial Consulting Practice Exam 2025 – 400 Free Practice Questions to Pass the Exam

Paying salaries to employees is classified as an example of operating activities in cash flow because it directly relates to the day-to-day operations of a business. Operating activities involve the cash effects of transactions that enter into the determination of net income, including cash receipts from sales of goods and services and cash payments to suppliers and employees. Salaries are a recurring expense necessary for running the business and maintaining its functions, thus falling squarely within operating activities.

In contrast, purchasing equipment relates to investing activities since it involves long-term asset acquisition. Issuing stock is a financing activity as it provides cash inflow through financing rather than operations. Selling a long-term asset also pertains to investing activities, as it involves the disposal of capital investments rather than the primary revenue-generating operations of the company. Therefore, paying salaries is the clear example of operating activities in cash flow.