Accounting Exam - Operating, Investing, Financing Activities
Inflow from investing activities
Selling of plant, property, equipment
Inflow from investing activities
Selling shares
Operating Activities
Should have positive cash flows, so that the entity can expand, generate cash, meet financial obligations and continue as a going concern
Outflow from investing activities
Lending of cash to other entities
Operating Activities
Normal activities of the entity
Financing Activities
Paying out shares to owners weakens the financial position of the entity, as there are fewer resources with which to re-invest
Outflow from financing activities
Payment of dividends
Outflow from operating activity
Payment of interest and of tax
Outflow from operating activity
Payment of salaries/wages
Outflow from operating activity
Payment to suppliers
Operating Activities
Profit should be lower than this, as profit includes depreciation/amortisation
Inflow from operating activity
Receipt of interest/dividend (depending on the nature of the entity)
Outflow from financing activities
Repayment of borrowings
Outflow from investing activities
Acquisition of plant, property, equipment
Outflow from investing activities
Acquisition of shares
Outflow from financing activities
Acquisition of/buying-back of shares
Investing activities
Acquisition/disposal of non-current assets and indicates the investment decisions of the entity
Inflow from operating activity
Cash acquired from credit-paying customers
Inflow from financing activities
Cash received from acquiring loans
Inflow from financing activities
Cash received from selling shares
Inflow from operating activity
Cash sales of goods/services
Financing Activities
Change the size/composition of the financial structure of the entity
Financing Activities
If this were positive, the entity may be using this acquired cash for investment. If it were being used to fund operating activities or continually increasing, there may be a risk of insolvency
Investing Activities
This is generally negative for entities wishing to expand
