13.12: Financing Activities

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Learning Outcomes

Identify cash flows that result from financing activities

So the third part of the cash flow statement involves financing activities. If a company borrows money, this is a financing activity. There are some inflows from financing activities including borrowing money or selling common stock. Outflows from financing activities include paying the principal part of debt (a loan payment), buying back your own stock or paying a dividend to investors.

Ready to jump in? Let’s start with this video explanation:

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A YouTube element has been excluded from this version of the text. You can view it online here: http://pb.libretexts.org/afm-2/?p=530

If a company borrows money, the entire amount of the cash comes in at one time, right? So that entire amount will be reflected on your cash flow statement.

Let’s look at inflows and outflows from financing activities:

Description	Inflow	Outflow
Borrow money	X
Repay the principal amount on a loan		X
Sell your own common stock	X
Buy back your own common stock		X
Pay a stockholder dividend		X

Can you think of any other activities that may be considered financing activities? If you look at your personal expenditures, a car loan or mortgage might be a financing activity!

Practice Questions

https://assessments.lumenlearning.co...sessments/9682

Financing Activities. Authored by: Freedom Learning Group. Provided by: Lumen Learning. License: CC BY: Attribution

Cash Flow Statement - Unit 9 - Part 2 - Investing and Financing Sections. Authored by: Tony Bell. Located at: https://youtu.be/6fTUb7qrSS4. License: CC BY: Attribution