Question

Compute cash flows from financing activities using the following company information.

Additional short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . $20,000

Purchase of short-term investments . . . . . . . . . . . . . . . . . . . . . . 5,000

Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,000

Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000

Short answer

The net cash provided by financing activities is computed as $4,000

Step-by-step solution

Meaning of Financing Activities

Financing activities refer to those activities that are related to financing the business by issuing shares, receipt of the loan, and repayment of the loan.

Computation of cash flows from financing activities

$\begin{array}{rcl}\mathbf{Net}\mathbf{}\mathbf{cash}\mathbf{}\mathbf{provided}\mathbf{}\mathbf{by}\mathbf{}\mathbf{financing}\mathbf{}\mathbf{activities}& \mathbf{=}& \mathbf{Additional}\mathbf{}\mathbf{Short}\mathbf{}\mathbf{term}\mathbf{}\mathbf{borrowing}\mathbf{-}\mathbf{cash}\mathbf{}\mathbf{dividends}\mathbf{}\mathbf{paid}\\ & \mathbf{=}& \mathbf{\$}\mathbf{20}\mathbf{,}\mathbf{000}\mathbf{-}\mathbf{\$}\mathbf{16}\mathbf{,}\mathbf{000}\\ & \mathbf{=}& \mathbf{\$}\mathbf{4}\mathbf{,}\mathbf{000}\end{array}$