Financing activities are those activities that are related to capital or long term funds of an enterprise. These activities results in the change in the capital and borrowed funds.
As per the AS3, the major cash inflows from financing activities are as follows: Cash proceeds from issue of shares and other similar instruments. Cash proceeds from issue of debentures, loans, notes, bonds, and other short and long-term borrowings.
As per the AS3, the major cash outflows from financing activities are as follows: Cash repayments of the amount borrowed in form of debentures, loans, notes bonds, and other short and long-term borrowings. Buy-back of shares and debentures. Interest paid on debentures, loans, and advances. Dividend paid to the preference shareholders and equity shareholders.
An important point that must be noted is that the purchase and sale of securities, interest paid or received and dividend received is treated as cash flow from operating activities for an investment company. But dividend paid is treated as cash flow from financing activities.
