Financing Activities – Classification and Examples

## Financing Activities – AS 3

### Definition

Activities that result in changes in the size and composition of the owner's capital and borrowings of the enterprise.

Think of it as: how the business raises money from investors and lenders, and repays them.

### Typical Inflows (Financing)

• Cash proceeds from issuing equity shares or other equity instruments
• Cash proceeds from issuing debentures, preference shares, bonds
• Cash proceeds from loans/borrowings taken from banks or others

### Typical Outflows (Financing)

• Buyback of equity shares (cash paid)
• Redemption of debentures / preference shares / bonds
• Repayment of loans or borrowings
• Dividends paid to equity/preference shareholders (for non-financial institutions)
• Interest paid on loans/debentures/bonds raised (for non-financial institutions)

### Balance Sheet Mapping

Financing activities link to the Equity and Non-Current Liabilities section:

• Share Capital, Securities Premium, Debentures, Long-term Borrowings.

### Key Point

Issuing shares is always a Financing activity for all entities (financial and non-financial alike). It can never be an operating activity.