March 18, 2009
what is the difference between cash flow from operating activities, and cash flows from fiancing activities?
Can you answer El C's question about cash flow?:
I can't tell the difference. In my book it says financing activities should be directly relate to company itself. But when I take a quiz it seems Cash paid for interest, and cash paid for tax is not consider directly related to company itself, rather being part of cash flow from operating activities. I am really confused, can you guys help me?
Sample Balance Sheet
I can't tell the difference. In my book it says financing activities should be directly relate to company itself. But when I take a quiz it seems Cash paid for interest, and cash paid for tax is not consider directly related to company itself, rather being part of cash flow from operating activities. I am really confused, can you guys help me?
Sample Balance Sheet
Filed under More Cashflow Answers by admin
Comments on what is the difference between cash flow from operating activities, and cash flows from fiancing activities? »
I know, this can be confusing, and sometimes, there is no easy answer. It depends on the management's cash management strategy. A single transaction may include cash flows that are classified differently. For example, when the cash repayment of a loan includes both interest and principal, the interest element may be classified as an operating activity and the principal element is classified as a financing activity.
Usually, however, interest on short term payables, e.g. on accounts payable, is treated as operating, whilst interest on long-term borrowings like mortgages and bonds is treated as financing.