# Cash Flow From Financing Activities – CFF Definition

## What Is Cash Flow From Financing Activities?

Cash flow from financing activities (CFF) is a section of a company’s cash flow statement, which shows the net flows of cash that are used to fund the company. Financing activities include transactions involving debt, equity, and dividends.

Cash flow from financing activities provides investors with insight into a company’s financial strength and how well a company’s capital structure is managed.

## Formula and Calculation for CFF

Investors and analyst will use the following formula and calculation to determine if a business is on sound financial footing.

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begin{aligned} &text{CFF = CED }-text{ (CD + RP)}\ &textbf{where:}\ &text{CED = Cash in flows from issuing equity or debt}\ &text{CD = Cash paid as dividends}\ &text{RP = Repurchase of debt and equity}\ end{aligned}

CFF = CED  (CD + RP)where:CED = Cash in flows from issuing equity or debtCD = Cash paid as dividendsRP = Repurchase of debt and equity﻿

1. Add cash inflows from the issuing of debt or equity.
2. Add all cash outflows from stock repurchases, dividend payments, and repayment of debt.
3. Subtract the cash outflows from the inflows to arrive at the cash flow from financing activities for the period.

As an example, let’s say a company has the following information in the financing activities section of its cash flow statement:

• Repurchase stock: $1,000,000 (cash outflow) • Proceeds from long-term debt:$3,000,000 (cash inflow)
• Payments to long-term debt: $500,000 (cash outflow) • Payments of dividends:$400,000 (cash outflow)

Thus, CFF would be as follows: