What is financing activity?：
Issues of shares,repayment of loan,sale of an investment.
Financing activities involve long-term liabilities and stockholders’ (or owner’s) equity.Financing activities are reported in its own section of the financial statement known as the statement of cash flows (SCF) or cash flow statement.
Examples of financing activities that involve long-term liabilities include the issuance or redemption of bonds.An increase in bonds payable is reported as a positive amount in the financing activities section of the SCF.The positive amount signifies a source of cash,or that cash was provided by issuing additional bonds.A decrease in bonds payable will be reported as a negative amount in the financing activities section of the cash flow statement.A negative amount connotes that cash was used to repurchase or redeem the corporation’s bonds.
Examples of financing activities involving stockholders’ equity include the issuance of common stock or preferred stock.Increases in these stock accounts will be reported as positive amounts in the financing activities section of the SCF.Positive amounts communicate that cash was provided by issuing more shares of stock—a source of cash.Examples of uses of cash (which are reported as negative amounts) in the financing activities section of the cash flow statement include a corporation’s purchase of its own stock,and dividends declared and paid on its stock.(The increase in retained earnings resulting from the corporation’s net income is reported in the operating activities section of the SCF.)
Operating activities
Operating activities include the production,sales and delivery of the company's product as well as collecting payment from its customers.This could include purchasing raw materials,building inventory,advertising,and shipping the product.
Under IAS 7,operating cash flows include:[11]
Receipts from the sale of goods or services
Receipts for the sale of loans,debt or equity instruments in a trading portfolio
Interest received on loans
Dividends received on equity securities
Payments to suppliers for goods and services
Payments to employees or on behalf of employees
Interest payments (alternatively,this can be reported under financing activities in IAS 7,and US GAAP)
Items which are added back to [or subtracted from,as appropriate] the net income figure (which is found on the Income Statement) to arrive at cash flows from operations generally include:
Depreciation (loss of tangible asset value over time)
Deferred tax
Amortization (loss of intangible asset value over time)
Any gains or losses associated with the sale of a non-current asset,because associated cash flows do not belong in the operating section.(unrealized gains/losses are also added back from the income statement)
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Investing activities
Examples of Investing activities are
Purchase or Sale of an asset (assets can be land,building,equipment,marketable securities,etc.)
Loans made to suppliers or received from customers
Payments related to mergers and acquisitions
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Financing activities
Financing activities include the inflow of cash from investors such as banks and shareholders,as well as the outflow of cash to shareholders as dividends as the company generates income.Other activities which impact the long-term liabilities and equity of the company are also listed in the financing activities section of the cash flow statement.
Under IAS 7,
Proceeds from issuing short-term or long-term debt
Payments of dividends
Payments for repurchase of company shares
Repayment of debt principal,including capital leases
For non-profit organizations,receipts of donor-restricted cash that is limited to long-term purposes
Items under the financing activities section include:
Dividends paid
Sale or repurchase of the company's stock
Net borrowings
Payment of dividend tax
Cash Flow from Financing Activities
What Does Cash Flow from Financing Activities Mean?
A category in the cash flow statement that accounts for external activities such as issuing cash dividends,adding or changing loans,or issuing and selling more stock.The formula for cash flow from financing activities is as follows:
Cash Received from Issuing Stock or Debt - Cash Paid as Dividends and for Re-Acquisition of Debt/Stock