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Ascertainment of Cash Flow from Financing Activities Video Lecture | Accountancy Class 12 - Commerce
FAQs on Ascertainment of Cash Flow from Financing Activities Video Lecture - Accountancy Class 12 - Commerce
| 1. What are financing activities in cash flow? |  |
Ans. Financing activities in cash flow refer to the activities that involve obtaining or repaying funds from external sources, such as issuing or repurchasing stock, borrowing or repaying loans, and paying dividends. These activities are reflected in the cash flow statement to show the inflow or outflow of cash related to financing the company's operations.
| 2. How is cash flow from financing activities ascertained? | |
Ans. Cash flow from financing activities is ascertained by analyzing the changes in the company's balance sheet accounts related to financing activities. It involves identifying the cash inflows and outflows associated with issuing or repurchasing stock, borrowing or repaying loans, and paying dividends. These amounts are then reported in the cash flow statement under the financing activities section.
| 3. What is the importance of cash flow from financing activities? | |
Ans. Cash flow from financing activities is important as it provides insights into how a company is obtaining or repaying funds to support its operations and expansion. It helps stakeholders, such as investors and creditors, assess the company's ability to generate cash internally or raise external funds. Positive cash flow from financing activities indicates the company's capacity to finance its growth, while negative cash flow may suggest reliance on external sources or financial distress.
| 4. How does cash flow from financing activities affect a company's financial health? | |
Ans. Cash flow from financing activities can significantly impact a company's financial health. Positive cash flow indicates that the company has enough funds to support its operations and potential investments. It can be a sign of financial stability and flexibility. Conversely, negative cash flow from financing activities may raise concerns about the company's ability to meet its financial obligations or indicate excessive reliance on debt to finance operations.
| 5. What are some examples of cash flow from financing activities? | |
Ans. Examples of cash flow from financing activities include issuing or repurchasing stock, borrowing or repaying loans, and paying dividends. Issuing stock generates cash inflow, while repurchasing stock leads to cash outflow. Borrowing loans increases cash inflow, whereas repaying loans results in cash outflow. Paying dividends to shareholders represents cash outflow. These activities are reported in the cash flow statement to provide a comprehensive view of the company's financing activities.
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