In a statement of cash flows, interest received from loans made as investments is classified as a cash flow from:

(A) Operating activities

(B) Trading activities

(C) Financing activities

(D) Investing activities

(E) None of the above

(A) Operating activities

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.

In the given question, interest is received from loans which treated as an investment come under operating activities because it is operating cash receipts which also include dividend income, income received from the commission, royalty, etc.

Hence, all other options are incorrect.