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Financing activities refer to those activities that fund the organisation like equity stock, preference stock, debentures, bonds, loans and the related expense of interest and dividend. A raising of the above items calls for a cash inflow hence should be added and vice-versa. Payment of interest or dividend is cash outflow and hence should be subtracted and vice-versa.
Financing activities reported on the statement of cash flows (SCF) involve changes to the long-term liabilities, stockholders' equity (sections of the balance sheet), and short-term borrowings during the period shown in the heading of SCF.
Sources of cash provided by financing activities include the borrowing of money on a short-term basis and/or long-term notes basis from a bank or other lenders, issuance of bonds payable, issuance of common stock, issuance of preferred stock, sale of treasury stock, and other increases in long-term liabilities and stockholders' equity.
Uses of cash reported in the financing activities section of SCF include repayment of short-term loans and/or long-term loans, the retirement of bonds payable, the purchase of a company's own stock, the declaration and payment of dividends, and other decreases in long-term liabilities and stockholders' equity
