How to Understand Cash Flow Statement (Step-by-Step) ![]() Any interest, cost dividends paid on debentures or shares will fall under financing activities.The Cash Flow Statement tracks the real inflows and outflows of cash from operating, investing and financing activities over a specified period of time. Q: Dividends paid by the company will fall under which of these categoriesĪns: The correct answer is option C. Dividends paid to the shareholders of the company.Interest paid on long-term borrowings and debentures.Cash received from issuing of debentures, loans and other borrowings.Receipts on the issuing of shares and other debt instruments.Most importantly these activities change the capital and borrowings of the firm.Ĭash Flow from Financing activity = Cash Received from Issuing shares or debts – Cash Paid as Dividends and Reacquiring of shares or debts Cash Inflow from Financing Activities These activities are confined mainly financial activities of the firm like trading of company’s shares, repaying investors, adding or changing loans, or issuing more stock whenever required. Even though these lie at the bottom of the statement but had its own importance. Advances and loans given to third parties.įinancing activities can be defined activities involving in the rise of the company’s capital.Payments made on acquiring of other company shares, debentures and other debt issues.Cash payments on purchasing long-term assets and other intangible goods like patents. ![]() Receipts received on trading of shares, debentures, bonds etc.Cash receipts received on the investment made in the other companies or firms.Cash received on interest on loans and advances given to the third parties.Investment activities cash inflow include the sale of assets.Cash flow from investment activities helps in the growth of capital also creates stability of the firm. These activities provide minor cash flow in the firm when compared with operating activities but have a great impact on the profitability of the firm. ![]() These activities include money spent on long-term assets, shares, debentures etc. Investment activities are the other type of cash flow statement activities in which cash transactions made on purchasing or sale of investments.
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