Financing activities

Definition

Financing activities are transactions and events whereby a business raises or repays capital. These activities include issuing stock, borrowing funds, and repaying debts.

5 Must Know Facts For Your Next Test

1. Financing activities appear on the cash flow statement and provide insight into a company's financial strategy.
2. Issuing shares of stock and taking out loans are considered inflows in financing activities.
3. Repayment of debt and repurchasing shares are considered outflows in financing activities.
4. The net cash provided by or used in financing activities helps assess a company's financial health and its ability to manage capital.
5. Understanding financing activities is crucial for forecasting a company’s future financial needs and strategies.

Review Questions

• What types of transactions are included in financing activities?
• How do financing activities impact the cash flow statement?
• Why is it important to analyze the net cash from financing activities?

Related terms

Operating Activities:

Transactions related to the primary operations of the business, such as sales revenue and operating expenses.

Investing Activities: Transactions involving the acquisition or disposal of long-term assets like property, plant, equipment, or investments.

Cash Flow Statement:

A financial statement that provides aggregate data regarding all cash inflows and outflows a company receives.