Cash Flows from Financing Activities
Cash inflows from financing activities normally arise from issuing debt or equity securi-
ties. Examples of such inflows include issuing bonds, notes payable, and preferred and
common stocks. For example, Google Inc.recently received cash proceeds of $1.16 billion
from its initial public offering of common stock. Often, companies that are expanding op-
erations will seek cash from debt and equity offerings; such is the case with Google as it
expands its internet services. Cash outflows from financing activities include paying cash
dividends, repaying debt, and acquiring treasury stock. For example, Intel Corporation
used $7.5 billion cash to acquire treasury stock to use for its stock option plans.
Cash flows from financing activities are reported on the statement of cash flows by
first listing the cash inflows. The cash outflows are then presented. If the inflows are
greater than the outflows, net cash flow provided by financing activitiesis reported. If the
inflows are less than the outflows, net cash flow used for financing activitiesis reported.
The cash flows from financing activities section in the statement of cash flows for
Family Health Care is shown below.
Cash flows from financing activities:
Additional issuance of capital stock $ 5,000
Deduct cash dividends (1,200)
Net cash flow from financing activities $ 3,800Noncash Investing and Financing Activities
A business may enter into investing and financing activities that do not directly in-
volve cash. For example, it may issue common stock to retire long-term debt. Such a582 Chapter 13 Statement of Cash Flows
Exhibit 2
Cash Flow from
Operations: Direct and
Indirect Methods
Direct Method
Cash flows from operating activities:
Cash received from patients $ 9,700
Cash received from rental of land 1,800 $ 11,500
Deduct cash payments for expenses:
Insurance premiums $8,400
Supplies 100
Wages 2,790
Rent 800
Utilities 580
Interest 100
Miscellaneous expense 420 (13,190)
Net cash flow from operating activities $ (1,690)Indirect Method
Cash flows from operating activities:
Net income, per income statement $ 6,390
Add: Depreciation expense $ 160
Increase in accounts payable 140
Increase in wages payable 220
Increase in unearned revenue 1,440 1,960
$ 8,350
Deduct: Increase in accounts receivable $2,650
Increase in prepaid insurance 7,300
Increase in supplies 90 (10,040)
Net cash flow from operating activities $ (1,690)Family Health Care, PC
Cash Flows from Operating Activities (Direct and Indirect Methods)
For the Month Ended November 30, 2007