Financing activities are the transactions through which a business raises money from, or returns money to, its owners and lenders. They include issuing shares, buying back shares, borrowing through loans or bonds, repaying the principal of debt, paying dividends and paying down the principal on finance leases. On the statement of cash flows they form one of three sections, alongside operating activities and investing activities.
How financing activities relate to the main entry
The calculation and analysis of this section is covered in the main entry on cash from financing activities. In accounting terms, financing activities are the cash flows that change the size and make-up of a company's long-term liabilities and equity. Proceeds from a $5 million bank loan are a financing inflow; a $1 million dividend payment and a $2 million share buyback are financing outflows. Under US GAAP, interest paid is classified as an operating cash flow and dividends paid as a financing cash flow, while IFRS (IAS 7) has allowed companies some choice; IFRS 18, effective in 2027, narrows that choice for most companies. Non-cash financing, such as converting convertible debt into shares, is disclosed separately rather than shown in the section. Analysts read the section alongside cash from operating activities to see whether a business funds itself from its own operations or depends on debt financing and new equity.