Question

How should we view the financing activities on the Statement of Cash Flows?

1) As a source of cash
2) As a use of cash
3) As a non-cash activity
4) Cannot be determined

Answer 1

Financing activities on the Statement of Cash Flows involve raising funds for a company's operations and investments through sources like debt and stock. These activities impact a company's cash position.

Step-by-step explanation:

Financing activities on the Statement of Cash Flows represent the sources and uses of cash related to raising funds for a company's operations and investments. These activities include obtaining long-term debt, issuing or repurchasing company stock, and paying dividends.

For example, if a company takes out a loan from a bank, that would be considered a financing activity. Similarly, if a company issues new shares of stock to raise capital, that would also be classified as a financing activity.

In terms of how to view these activities, it is important to analyze the impact they have on the company's cash position. Positive financing activities, such as obtaining new loans or selling stock, would increase cash inflows, while negative financing activities, such as repurchasing stock or paying dividends, would decrease cash.