Cash Flows from Financing Activities represent the net change in cash received from or repaid to external providers of capital.
Cash Flows from Financing Activities (also known as "Financing Cash Flow") is a measure (listed on a company's Cash Flow Statement) of the money that a company took in or paid out to finance its activities. It represents the flow of cash between a company and its owners and creditors. Typically included in this calculation are the issuance or repurchase of common stock, the issuance or repayment of debt and the dividends paid out to shareholders.
Different accounting standards vary as to exactly what items can be classified as financing. For example, International Financial Reporting Standards (IFRS) specify that interest payments on debt should be included in the calculation of a company's Cash Flows from Financing Activities.
Unlike most other metrics, negative Cash Flows from Financing Activities are not necessarily bad, nor are positive Cash Flows from Financing Activities necessarily good. Negative Cash Flows from Financing Activities could mean that the company is taking on more long-term debt or issuing more equity, but it could also mean that the company is making higher dividend payments or more stock repurchases.
A company is due to pay its ordinary shareholders a quarterly dividend. This dividend is considered a cash outflow from financing activities as the company uses its own cash to pay these dividends to its shareholders.
Typically, Cash Flows from Financing activities are divided into four subcomponents: