A company issues $1 million of new shares and pays $200,000 in cash dividends during the year.In addition,the company took advantage of falling interest rates to borrow $1.5 million in a new bond issue and paid off existing bonds with a face value of $2 million.The company bought 500 of another company's $1,000 bonds at a $100,000 premium.The net cash flow from financing activities is:

Question

Quizplus · Accepted Answer

Cash inflows from financing activities include the issuance of long-term debt and stock.Cash outflows from financing activities include the repayment of long-term debt,the repurchase of stock,and the payment of cash dividends.Purchasing another company's bond is an investing activity.
Inflows = $1,000,000 + $1,500,000 = $2,500,000
Outflows = $200,000 + $2,000,000 = $2,200,000
Net Cash inflow = $300,000.

A Company Issues $1 Million of New Shares and Pays