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

The net cash flow from financing activities is calculated as:

(New share issue + bond issue - bond repayment - premium paid for bonds) - cash dividends

= ($1 million + $1.5 million - $2 million - $100,000) - $200,000

= $300,000 (inflow)

Therefore, the correct answer is D, an inflow of $300,000.

A Company Issues $1 Million of New Shares and Pays