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2.3.3 Cash Flow from Financing Activities
According
to
IAS
7
paragraph
6
(International
Financing
Reporting
Standard
2005), cash
flow
from
financing activities is defined as
“activities
that result
in
changes
in
size
and
composition
of
the equity
capital
and
borrowings
of
the
entity”.
To
what
we
can
conclude,
financing
activities
are the
least
important
activities
among
the
two
other
activities
(operating
and investing)
due
to
the
reason
that company
investment
is
more important
when compared to
the
way
the company
finance
its purchases
(Horngren et al, 2005 p.786). The financing
activities are associate from the cash flow resulting from the change in
stockholder’s equity and long term liabilities. Last, even though financing
activities
are
the
least
important
among
the
all
cash flow
activities,
however
financing
activities
is
still
playing
a
significantly important
role
when
refer
to
the
IAS
7
paragraph
17
saying
that
“the
separate
disclosure
of
cash
flows
arising from financing activities are important because it is useful in predicting
claims in the future cash flows by providers of capital to the entity”.
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