Question

Write any two examples for financing activities.

Hint:

To easily identify financing activities, look for items that appear in the "Shareholders' Funds" and "Non-Current/Long-term Liabilities" sections of the Balance Sheet.

Answer 1

Step 1: Understanding the Concept:
In a Cash Flow Statement, cash flows are classified into three activities: Operating, Investing, and Financing. Financing activities relate to transactions that change the size and composition of the owner's capital and borrowings of the enterprise.

Step 2: Detailed Explanation:
Financing activities basically deal with how a business raises its capital and pays it back.
Examples of cash flows from financing activities include:
Cash Inflows:
1. Proceeds from the issue of equity or preference shares.
2. Proceeds from the issue of debentures, bonds, or taking long-term loans.
Cash Outflows:
1. Repayment of loans or redemption of debentures/preference shares.
2. Payment of dividend to shareholders.
3. Payment of interest on debentures or loans.

Step 3: Final Answer:
Two examples of financing activities are: 1. Issue of equity shares for cash. 2. Payment of dividend to shareholders.