Cash Flow from Financing Activities
A crucial section of the cash flow statement
Thecash flow statement是构成公司的三个主要陈述之一financial statements(the other twobeing the balance sheetand the statement of profit or loss). It gives us an idea about the company's actual cash position rather than simply presenting on-paper profits像损益表。
Knowing the amount of cash a company generates and possesses and the activities it generates it from can be extremely useful in most cases.
This article will cover cash flow from financing activities, one of the three activities from which a company generates cash flows (the other two being operating and investing activities) present in a firm'scash flow statement。
What is it?
Cash from financing activities represents the source or way a company raises capital and covers the return of the capital raised to the investors. In simple words, it monitors the net change in cash related to capital raising and related activities.
例子s of financing-related activities are - borrowing or repayment of the debt, issuing additional stock orbuyback现有股票，并向投资者支付股息。
融资活动的现金流is considered one of the most important sections of the现金流量表。对于大型公司而言，尤其如此，因为本节可以代表导致大量现金流出/流出的交易。
这些通常会导致公司核心运营中生成/使用的现金无效。但是，现金流的声明格式有某些例外，
例如，不使用杠杆作用或向其股东支付股息的小型企业不包括现金流量表中的融资中的现金流。
Investors used to look at the income statement and balance sheet for hints about the company's financial status. However, over time, investors have begun to independently examine each of these statements, with more importance on the cash flow figures.
This increase in the importance of cash flows is primarily due to the increasing use of thediscounted cash flow方法 （DCF) to evaluate companies and assets.
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Understanding the cash flow允许人们更好地了解业务并做出明智的投资决策。简而言之，现金流报表告诉我们，公司将其利润转化为实际现金有多高效。
However, certain industries/companies are not cash-rich; hence, looking at their cash flow statements for investment decisions will not be appropriate. We will cover such companies later in this article.
How is it Different from Other Types of Cash Flows?
There are typically three types of cash flows presented in a cash flow statement:
- Cash flow from operating activities
- Cash flow from investing activities
- 融资活动的现金流
Having talked about the financing activities, let us see how it differs from the other two.
Cash flow from operating activities is often presented first in a company's cash flow statement. It tracks the change in cash related to the daily operations of a business such as - manufacturing, selling a good or service, etc., therefore focusing only on the core activities.
On the other hand, cash flow from investing activities presents the cash generated or used in investment-related activities of a business. These activities include purchasing or selling fixed assets (also known ascapex），收购或出售其他企业，买卖可销售的证券。
The differences between them can be summarized as follows:
- Cash Flow from Operating Activities- A company's operating activities may have several components and may differ depending on the type of company.
These may include the production, sales, delivery of the product/service, payment collection, buying raw materials, inventory, etc.
- 投资活动的现金流量- 组织的投资活动通常可以归类为购买或出售固定/长期资产（例如土地，建筑物，工厂，机械等）。这些还包括与mergers and acquisitions。
- Cash Flow from Financing Activities- This is the section we will focus on in this article. These activities, as discussed above, usually include transactions such as issuance or buyback of stocks, payment of cash dividends, borrowing or repayment of borrowings, etc.
Therefore, just by glancing at the components of each type of cash flow, one can spot the differences between them. Let us now shift our focus to the calculation of these cash flows.
Formula
知道什么包含融资活动是计算融资活动现金流量的第一步。一般遵循的经验法则是，资产负债表的长期负债和公平部门的所有变化都是由于融资活动造成的。
For example, repayment or issue of long-termbonds, buyback of shares, and payment of dividends (reduction in retained earnings）是一些融资活动的例子。
Exceptions to this rule exist, and it is advisable to exercise proper judgment while classifying cash flows. For example, the deferred tax might be a long-term liability, but taxes, in general, are accounted for under operating activities as they are considered crucial to a company's operations.
The formula to calculate it is given below:
融资活动（CFF）的现金流量组成部分
CFF有各种行式项目介绍下它;来comprehensively understand the entire concept, we will have to study each line item.
- Issuance of stock -每当公司发行额外的股票/股份公司时，它就会从投资者那里获得现金。
Additional stock can be issued for various reasons such as - expansion of business, repayment of the debt, etc. This issuance of stock is categorized as a positive change in the financing cash position of the company.
- Buyback/Repurchase of shares -有时，公司使用现金回购公司的股份from the open market。
通常是为了减少ESOP产生的股权稀释，向公司对业务的信心发出信心或获得税收优惠。股票回购的最常见原因是该公司认为其股票被低估了。
This is considered an outflow of cash and is therefore subtracted.
- 股息 -Companies often pay cash dividends to their shareholders using surplus cash present in the company.
这使投资者有动力将公司的股份除外。但是，由于这需要从公司目的到现金，因此被认为是现金流出。
- Borrowings -Companies use debt/borrowings to finance a range of activities例如营运资金and capital expenditures (purchase of fixed assets), to name a few. As borrowings lead to an inflow of cash, this is added to cash from financing activities.
- Repayment of borrowings-When companies possess surplus cash or have a healthy cash flow, they usually repay borrowings when the purpose of borrowing is fulfilled. Repayment of debt involves paying the debtor cash and is therefore considered an outflow from financing activities.
例子
The following is an example fromAlphabet's 2021 annual report。突出的地区是您从融资活动中找到现金流的地方。
Alphabet's cash flow statement clearly shows a net outflow of cash due to the company's financing activities. The primary reason is that it spent a lot of cash on repurchasing its shares and repaying debt, which was not fully offset by the cash inflow from borrowings.
但是，这些数字孤立的意义不大。对于投资者来说，首先将现金流与前几年的现金流报表进行比较，至关重要。
Second, one has to analyze the transactions which lead to these cash flows, as they provide us with a better understanding of the underlying operations.
让我们以属于完全不同行业的公司的另一个例子。
亚马逊's cash flow from financing activities看起来与字母明显不同。这是一些观察from its 10-K:
- 亚马逊has been raising money by taking on short-term debt in the recent past. This has resulted in an inflow of cash into the company.
- Interestingly, it has also paid the majority of its short-term borrowings, which is a healthy sign. However, this has led to an outflow of cash from financing activities.
- 它已经花费了大量的现金偿还普林西普al amount of financial leases. This is a type of lease where a financial institution has legal control over a specific asset while the lessee company enjoys operating control of the asset.
- It has turned net positive in cash from financing activities in FY-21, unlike the last financial year where there was a net outflow.
尽管这两家公司属于两个完全不同的行业，但这些现金流的计算和分类保持不变。但是，必须指出的是，对于在各个行业运营的公司，必须对现金流进行不同的解释。
The net change in cash flow from financing activities of a company may either be positive or negative depending on various factors. However, one must look beyond whether the number is positive or negative, as various factors might lead to the final cash flow. Let us understand this in detail.
A company that frequently raises capital through debt or equity might show a positive cash flow from financing. However, this might signal the fact that the earnings of the company are not enough to support its operations or other plans.
Also, there might be a case where financial institutions (debtors) raise interest rates resulting in higher debt servicing charges for the company, which might not be adequately reflected in the financing activities section of the cash flow statement.
Another red flag would be if the company continuously repurchases shares or pays dividends to its shareholders even though it is not generating enough profit. Companies make these attempts to keep their stock price intact.
Therefore, any notable change in the cash flow from financing should be probed by investors. Also, it is essential to check the other sections of the cash flow statement, such as cash flow from operating and investing activities, as these also depict a company'sfinancial health。
分析融资现金流量时的另一个重要因素是多个时间表的现金流入频率。
This is to understand if a company has been issuing additional stocks or borrowing from debtors very frequently, which will result in a high inflow of cash. However, this is a major red flag as this implies that the firm cannot generate sufficient earnings to finance its core operations.
Therefore, investors must study the reasons behind unusual inflows or outflows of cash from financing activities.
Key Takeaways
- A cash flow statement contains three types of cash flows: cash flow from operating operations, cash flow from investment activities, and cash flow from financing activities.
- Cash from financing activities explains how a firm raises money and covers the return of the cash raised to investors. In layman's terms, it tracks the net change in cash due to capital raising and related operations.
- The formula for cash flow from financing activities includes adding all items contributing to an inflow of cash, such as issuing stock, borrowing, and subtracting all items that lead to a cash outflow, such as repaying debt or paying cash dividends.
- It is critical for investors to carefully analyze transactions leading to change in net cash flow from financing rather than simply looking at whether the value is positive or negative.
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