Cash Flow from Financing Activities

Category

Cash Flow

Units

Currency

US-GAAP elements

NetCashProvidedByUsedInFinancingActivitiesNetCashProvidedByUsedInFinancingActivitiesContinuingOperations

Reference

ASC 230, Statement of Cash Flows (financing activities)

Source

Reported in SEC EDGAR filings (US-GAAP XBRL taxonomy)

Cash from financing activities, also called cash flow from financing activities, is the net cash a company raised from, or returned to, its lenders and owners during a period. It includes borrowing and repaying debt, issuing and repurchasing shares, and paying dividends. It is the third section of the cash flow statement.

A positive figure means the company brought in more capital than it paid out. A negative figure means it returned capital, through debt repayment, buybacks, or dividends, on a net basis.

ASC 230 treats three broad kinds of transactions as financing: raising money from owners and paying it back to them, whether as dividends or by buying back their shares; borrowing and repaying principal; and settling longer-term credit that creditors extended to the company. In XBRL, companies tag the total NetCashProvidedByUsedInFinancingActivities, which includes discontinued operations, and NetCashProvidedByUsedInFinancingActivitiesContinuingOperations when they separate them.

Several items land here that readers sometimes expect elsewhere. Principal payments on finance leases are financing, while operating lease payments are operating. Cash paid to tax authorities for shares withheld from employee equity awards is financing. Debt prepayment and extinguishment costs are financing. Purchases of additional shares in a subsidiary the company already controls are financing, because they are transactions with noncontrolling owners rather than acquisitions. Interest paid, by contrast, is an operating outflow under US GAAP even though the underlying debt is financing.

Read together with the other two sections, the financing total shows how a company funds itself. A mature company with strong operating cash flow typically shows negative financing cash flow as it pays dividends, buys back stock, and retires debt. A younger or distressed company relying on new borrowing or share sales shows positive financing cash flow. Analysts look beneath the total to see whether shareholder returns are funded by operations or by new debt.