financing activities

Examples of financing activities in the following topics:

• Reporting Financing Activities

  • Reporting financing activities involves determining if cash is received or paid out due to financing activities such as issuing stock or paying dividends.
  • Everything concerning the loan is a financing activity.
  • Extending credit is an investing activity, so all cash flows related to that loan fall under cash flows from investing activities, not financing activities.
  • Non-cash financing activities may include:
  • Generally speaking, the rules for reporting financing activities include the following:

• Cash Flow from Financing

  • Cash flows from financing activities arise from the borrowing, repaying, or raising of money.
  • Everything concerning the loan is a financing activity.
  • Extending credit is an investing activity, so all cash flows related to that loan fall under cash flows from investing activities, not financing activities.
  • As is the case with operating and investing activities, not all financing activities impact the cash flow statement -- only those that involve the exchange of cash do.
  • Distinguish financing activities that affect a company's cash flow statement from all of the business's other transactions

• Components of the Statement of Cash Flows

  • The cash flow statement has 3 parts: operating, investing, and financing activities.
  • Other activities that impact the long-term liabilities and equity of the company are also listed in the financing activities section of the cash flow statement.
  • Non-cash investing and financing activities are disclosed in footnotes to the financial statements.
  • Statement of cash flows includes cash flows from operating, financing and investing activities.
  • Recognize how operating, investing and financing activities influence the statement of cash flows

• Payments

  • Cash payments describe cash flowing out of a business resulting from operating activities, investment activities and financing activities.
  • If a business runs out of cash and is not able to obtain new financing, it will become insolvent.
  • These cash payments can result from operating activities, investment activities and financing activities.
  • Generally speaking, normal operating activities refer to the cash effects of transactions involving revenues and expenses that impact net income.

• Cash Flow from Investing

  • These activities are represented in the investing income part of the income statement.
  • However, this cash flow is not representative of an investing activity on the part of the company.
  • The investing activity was undertaken by the shareholder.
  • Therefore, paying out a dividend is a financing activity.
  • Some examples of investment activity from the company's perspective would include:

• Reporting Investing Activities

  • These activities are represented in the investing income part of the income statement.
  • It is important to note that investing activity does not concern cash from outside investors, such as bondholders or shareholders.
  • However, this cash flow is not representative of an investing activity on the part of the company.
  • The investing activity was undertaken by the shareholder; therefore, paying out a dividend is a financing activity.
  • When reporting investing activities, it is important to be able to decipher a cash inflow from a cash outflow.

• Receipts

  • There are a couple of methods for obtaining short-term bank financing.
  • Key points to remember when obtaining bank financing include:
  • In addition to bank financing, a company can borrow against its assets from a financing company.
  • There are three forms of inventory financing.
  • A company needs to understand the timing involved with cash-producing or cash-depleting activities before it can properly plan for cash flows.

• Finance

• Current Issues in Finance

  • Current issues in finance include the economic and regulatory impacts of the financial crisis and the growth of new types of finance.
  • The crisis played a significant role in the failure of key businesses, declines in consumer wealth, prolonged unemployment, and a downturn in economic activity in the United States.
  • Discuss events and trends in finance during the early 21st century

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