Question

Write two examples of cash inflows by financing activities.

Hint:

Financing inflows mainly include issuing shares, raising loans and issuing debentures.

Answer 1

Financing activities are those business transactions that affect the long-term liabilities and owners' equity of a company. Cash inflows from financing activities arise when a company raises funds to support its operations or growth. One major example is the issue of shares, where the company receives cash from investors in exchange for ownership rights. Another example is the issue of debentures or raising long-term loans from financial institutions, which brings additional funds into the business. These inflows increase the financial strength of the organisation and help finance expansion, asset purchases or other long-term projects. Cash flow from financing activities is an important part of the cash flow statement as it shows how the company obtains long-term funds to support its strategic objectives.