Plz answer quickly..why interest paid by a finance company is considered as operating activity? As dividend paid is considered as financing activity similary debt also is a source of finance and affects capital so interest paid should be considered as financing activity.

Dear Student

We know that all the activities which relate to core business activity of the organization are operating activities.
Since for Financing organization, the main business activity is giving and taking finance, therefore interest paid or received are its Operating income and expenses as they directly relate to the principal business activity.

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For financing company interest paid or interest received is a part of their business ( i.e. operations) that'swhy it is a part of operating activity.
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