What are financing activities in a cash flow statement

What are financing activities in a cash flow statement: 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. It is the net amount of funding a company generates in a given time period, used to finance its business.

Examples of Cash flow from financing activities are:

  1. Cash receipt from issue of shares.
  2. Payment of preliminary expenses
  3. Repayment of loans.
  4. Payment of Preliminary Expenses
  5. Payment of interst on borrowings.
  6. Proceeds from issue of debentures
  7. Payment of Dividend
  8. Payment for Buy Back of Equity Shares




What are financing activities in a cash flow statement: Example 1

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

What are financing activities in a cash flow statement: Example 2

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




What are financing activities in a cash flow statement: Example 3

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 = 3600000 (-) 2400000
= 1200000
Premium on issue of shares = Closing balance of security premium (-) opening balance of security premium
= 500000 (-) 400000
= 100000
Issue of debentures = Closing balance of debentures (-) Opening balance of debentures
= 960000 (-) 800000
= 160000
Redemption of preference shares = Opening balance of preference shares (-) Closing balance of preference shares
= 1600000 (-) 400000
= 1200000

Premium on redemption of preference shares = 1200000 X 15/100 = 180000

Interest paid on debentures = 800000 X 16% = 128000

Add: Interest on new debentures issued = 160000 X 16% X 6/12 = 12800

Total interest on debentures = 128000 + 12800
= 140800

Dividend paid on equity shares = 2400000 X 12/100 = 288000

Dividend paid on preference shares = 1600000 X 15/100

= 240000

What are financing activities in a cash flow statement: Example 4

Akash Ltd provides the following information. Cash flow from financing activities will be:

Additional information:
1 Interest paid on debentures Rs 7000 .
2 Dividend paid Rs 12000 .

Explanation : –

Issue of equity share capital Closing balance of debentures (-) opening balance of debentures
225000 (-) 150000
75000
Cash proceeds from 15 % Debentures = Closing balance of debentures (-) opening balance of debentures
= 60000 (-) 0
= 60000
Redemption of 12 % Debentures = opening balance of debentures (-) Closing balance of debentures
= 50000 (-) 0
= 50000

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