Cash Flows From Financing Activities
Cash flows from financing activities is the last of the three sections of a statement of cash flows. It shows the cash inflows and outflows related to transactions with the providers of finance i.e. the owners and the creditors of the company. Thus, cash flows from financing activities include the following basic components:
- Proceeds from borrowings (both shot-term and long-term)
- Cash received from owners usually on issuance of stock
- Repayments of borrowings
- Repayments to owners
However certain items are classified differently by different accounting standards. For example, under IFRS, interest payments and dividend payments are classified either as cash flows from operating activities or cash flows from financing activities. Under US GAAP interest payments can only be classified as cash flows from operating activities and dividends can only be classified as cash flows from financing activities.
Example
| Cash Flows from Financing Activities | |
| Loan Obtained | $20,000 |
| Issuance of Common Stock | 125,000 |
| Treasury Stock Purchased | − 32,000 |
| Dividends Paid | − 10,000 |
| Net Cash Flow from Financing Activities | $103,000 |
by Irfanullah Jan, ACCA and last modified on