Cash Flow From Financing Activities

Remember Scurvy Prince John from the Disney version of Robin Hood, how he adored gold and kept a list of where he got it? He did that mostly so he didn’t miss squeezing his subjects for more...but a cash flow ledger is sort of the system he had, tracking all the cash and where it came from.

Cash Flow from Financing Activities is a category on the cash flow ledger, along with Cash Flow from Investing Activities, and Cash Flow from Operating Activities. Financing activities include, well, all the cash flows from financing activities, such as selling or repurchasing stock, paying debts and dividends. If money is coming into the company, such as selling stock, it’s a positive flow. If it’s leaving the company, such as paying a debt, it’s negative.

For example, say research and development in a business has The Best Idea Ever. Management is a bit...eh on it. R&D bombed once before, and so management is a bit skittish (no sense of adventure). The business may start buying back their shares, so if their value dips a bit on the latest Best Idea Ever, they’re not on the hook to the investors.

The category itself is usually one line, with a sum total. This amount is tracked regularly...it’s not an annual thing. Ideally, this leaves a business with an idea of what cash flow it’s usually generating. If the number on that line suddenly becomes large, it could signify the company is moving a lot of shares...selling them or buying them back. That’s not necessarily a bad thing, but it’s one of those figures that can act as a good cue for a second look when necessary.