The purchase of treasury stock is classified in the statement of cash flows as a financing activity. The Option B is correct.
In cash flow statement, the financing activity focuses on how the company raises capital and pays it back to investors through capital markets. It also include paying of cash dividends, adding or changing loans or issuing and selling more stock.
This means that financial activity section of the statement of cash flows measures the flow of cash between a firm and its owners and creditors.
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