Cash flow from financing activities is a category in a company’s cash flow statement that accounts for external activities that allow a firm to raise capital. These activities result in change in capital and borrowings of the enterprise. Cash flow from financing activities example are as given below:
- Cash receipt from issue of shares.
- Payment of preliminary expenses
- Repayment of loans.
- Payment of interst on borrowings.
- Proceeds from issue of debentures
- Payment of Dividend
Cash Flow from Financing Activities Example 1:
Following particulars are provided by Amit Ltd. Net cash flow from financing activities will be:
Additional information:
a) Preference dividend on preference shares and an interim dividend on equity shares @ 12 % were paid on 30th September 2014 .
b) Preference shares were redeemed on 31st March 2015 at a premium of 15 %. Such premium has been provided out of profits. New shares and debentures issued on 1st October 2014
Explanation : –
Issue of share capital = Closing balance of share capital (-) Opening balance of share capital
Equity share capital = 36,00,000 (-) 24,00,000
= 12,00,000
Premium on issue of shares = Closing balance of security premium (-) opening balance of security premium
= 5,00,000 (-) 4,00,000
= 100000
Issue of debentures = Closing balance of debentures (-) Opening balance of debentures
= 9,60,000 (-) 8,00,000
= 160000
Redemption of preference shares = Opening balance of preference shares (-) Closing balance of preference shares
= 16,00,000 (-) 4,00,000
= 12,00,000
Premium on redemption of preference shares = 12,00,000 X 15/100 = 1,80,000
Interest paid on debentures = 8,00,000 X 16% = 1,28,000
Add: Interest on new debentures issued = 1,60,000 X 16% X 6/12 = 12,800
Total interest on debentures = 1,28,000 + 12,800
= 1,40,800
Dividend paid on equity shares = 24,00,000 X 12/100 = 2,88,000
Dividend paid on preference shares = 16,00,000 X 15/100
= 2,40,000
Cash Flow from Financing Activities Example 2:
Akash Ltd provides the following information. Cash flow from financing activities will be:
Additional information:
1 Interest paid on debentures Rs 7,000 .
2 Dividend paid Rs 12,000 .
Explanation : –
Issue of equity share capital Closing balance of debentures (-) opening balance of debentures
2,25,000 (-) 1,50,000
75,000
Cash proceeds from 15 % Debentures = Closing balance of debentures (-) opening balance of debentures
= 60,000 (-) 0
= 60,000
Redemption of 12 % Debentures = opening balance of debentures (-) Closing balance of debentures
= 50,000 (-) 0
= 50,000
Cash Flow from Financing Activities Example 3:
Following particulars are provided by Akash Ltd . The total money received from issue of equity shares will be:
Additional information:
a Preference dividend on preference shares and an interim dividend on equity shares @ 3 % were paid on 30th September 2014.
b Preference shares were redeemed on 31st March 2015 at a premium of 18 %.Such premium has been provided out of profits. New shares and debentures issued on 1st October 2014.
Explanation : –
Issue of share capital = Closing balance of share capital (-) Opening balance of share capital
Equity share capital = 6750000 (-) 4500000
= 2250000
Premium on issue of shares = Closing balance of security premium (-) opening balance of security premium
= 937500 (-) 750000
= 187500
Interim dividend paid = 4500000 x 3 %
= 135000
Total amount received from issue of equity shares = Total amount of shares issued + Security premium received on issue (-) Interim dividend paid
= 2250000 + 187500 (-) 135000
= 2302500
Cash Flow from Financing Activities Example 4:
Following particulars are provided by Akash Ltd . The total amount paid to preference shares holders will be:
Additional information:
a Preference dividend on preference shares and an interim dividend on equity shares @ 15 % were paid on 30th September 2014 .
b Preference shares were redeemed on 31st March 2015 at a premium of 12 %.Such premium has been provided out of profits. New shares and debentures issued on 1st October 2014
Explanation : –
Redemption of preference shares = Opening balance of preference shares (-) Closing balance of preference shares
= 400000 (-) 100000
= 300000
Premium on redemption of preference shares = 300000 X 12/100 = 36000
Preference dividend = 400000 X 7%
= 28000
Total amount paid = 300000 + 36000 + 28000
= 364000
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