Course 108: A Tour through the Cash-Flow Statement
Cash Flows from Financing Activities
In this course
1 Introduction
2 Cash Flows from Operating Activities
3 Cash Flows from Investing Activities
4 Cash Flows from Financing Activities

The final portion of the Statement of Cash Flows is the "Cash Flow from Financing Activities" section. These include any activities involved in transactions with the company's owners or creditors. Some things that typically show up in this section:

Dividends Paid. This figure is the total dollar amount the company paid out in dividends over the specified time period. (For dividends per share, you have to look elsewhere.) Young, growing companies and many mature technology companies tend not to pay dividends.

Issuance/Purchase of Common Stock. This is an important number to look at because it indicates how a company is financing its activities. New, rapidly growing companies will often issue lots of new stock; this practice dilutes the value of existing shares, but it also gives the company cash for expansion. Slower-growing companies that generate a lot of free cash flow tend to be the ones that buy back their own stock. This increases the value of existing shares and shrinks the company's asset base; it's sometimes used as a way of returning value to shareholders.

Issuance/Repayments of Debt. This number tells you whether the company has borrowed money or repaid money it previously borrowed. Borrowing is the main alternative to issuing stock as a way for companies to raise capital. It tends to be used more by older, more mature companies, because they can generally borrow money at a much lower rate than an unproven startup.


Next: The Quiz >>

Print Lesson |Feedback | Digg! digg it
Learn how to invest like a pro with Morningstar’s Investment Workbooks (John Wiley & Sons, 2004, 2005), available at online bookstores.
Copyright 2015 Morningstar, Inc. All rights reserved. Please read our Privacy Policy.
If you have questions or comments please contact Morningstar.