It really should be level one question, but I am confused about the concept.
Does negative financial activity cash flow(notes payable, long term debt) mean outflow and use of cash? The number should be deducted from free cash flow for equity, right?
a negative number in cash flows for financial activities can mean repayment of debt, share repurchases, dividends paid, and other things.
Net borrowing is a component of FCFE, so if a company pays down $x in debt, then x should be subtracted when calculating FCFE.
That is confusing on the CFAI’s part in my most humble of opinions. I looked at the balance sheet when I did that question, which is clearer for this question.
If you read the note in the answer’s explanation, it clears it up. The sub-total for CFF is cash used for financing activities. So -50 is used for the note and LT financing issuances. In other words, 50 is provided from these sources.
Dose that make sense?
So “used” for financial activity: -50, meaning the source of cash is +50. Hmmn, that sounds right. It’s just a little tricky and I don’t see any cash flow statement like that.
Thank you!
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