Cash Flow from Financing Activities

Definition: Cash Flow from Financing Activities is a category in the cash flow statement that measures the flow of cash between a firm and its shareholders and creditors. Financing activities include the inflow of cash from investors (e.g., issue of common stocks), as well as the outflow of cash to shareholders (e.g., issuing cash dividends).

Formula:
Cash Flow from Financing Activities = Cash Received from Issuing Shares or Debts - Cash Paid for Dividends - Cash Paid for Repurchase of Shares/Debts

Example:
Given the following information, calculate the cash flow from financing activities:
Called-up ordinary share capital (Year 18) $600,000
Called-up ordinary share capital (Year 19) $900,000
Share premium (Year 18) $0
Share premium (Year 19) $30,000
Debenture loans (Year 18) $200,000
Debenture loans (Year 19) $150,000
Payment of dividends $100,000

Solution:
Repayment of debenture loans = 200,000 - 150,000 = $50,000
Issue of ordinary shares = (900,000 - 600,000) + (30,000 - 0) = $330,000
Cash Flow from Financing Activities = Issue of ordinary shares - Payment of dividends -   Repayment of debenture loans = 330,000 - 100,000 - 50,000 = $180,000
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