Cash Flows from Financing Activities :The final category of adjustments we need to address on a statement of cash flows is money raised by financing activities. As was the case with cash from operations, we can have both positive and negative adjustments to cash flow depending on the financing activities the company is engaged during the year. Typical adjustments appearing here include changes in long and short term debt (issuing and redemption), issuing of preferred stock, issuing of common stock, retirement of stock, and stock dividends paid in cash.
Example: In our example, ‘X’ Company decided to raise Rs. 2,50,000 by issuing common stock. They also issued around Rs.5,00,000 in preference share, and redeemed around Rs. 3,00,000 in long term debt. Finally, they paid a cash
|Net cash flows from financing activities||Rs.|
|Issuance of common stock ||2,50,000|
|Issue of preference shares ||5,00,000|
|Redemption of long term debt||(3,00,000)|
|Net cash provided by (used) financing activities||(2,00,000)|
|Net cash provided by financing activities||2,50,000|
In this example, ‘X’ Company used less money in their financing activities than they generated during the year.