CASH FLOW FROM

FINANCING ACTIVITIES
(CFF)
GROUP 2 PRESENTATION
FUNDAMENTALS OF ACCOUNTING 2
WHAT IS CASH FLOW FROM FINANCING
ACTIVITIES?

Cash flow from financing activities (CFF) is a

section of a company’s cash flow statement, which
shows the net flows of cash that are used to fund
the company. Financing activities include
transactions involving debt, equity, and dividends.
FORMULA AND CALCULATION FOR CFF

Investors and analyst will use the following formula and calculation to
determine if a business is on sound financial footing.
CFF = CED − (CD + RP)
Where :
CED = Cash in flows from issuing equity or debt
CD = Cash paid as dividends
RP = Repurchase of debt and equity
FORMULA AND CALCULATION FOR CFF

1. Add cash inflows from the issuing of debt or

equity.
2. Add all cash outflows from stock repurchases,
dividend payments, and repayment of debt.
3. Subtract the cash outflows from the inflows to
arrive at the cash flow from financing activities for
the period.
CASH FLOW FROM FINANCING ACTIVITIES
(CFF)

Cash flow from financing activities (CFF) measures

the movement of cash between a firm and its
owners, investors, and creditors. This report shows
the net flow of funds used to run the company
including debt, equity, and dividends.
CAPITAL FROM DEBT OR EQUITY

CFF indicates the means through which a company

raises cash to maintain or grow its operations. A
company’s source of capital can be from either debt or
equity. When a company takes on debt, it typically does
so by issuing bonds or taking a loan from the bank.
Either way, it must make interest payments to its
bondholders and creditors to compensate them for
loaning their money.
POSITIVE AND NEGATIVE CFF

Debt and equity financing are reflected in the cash

flow from financing section, which varies with the
different capital structures, dividend policies, or debt
terms that companies may have.
THE END