Question: The third category of cash flows lists the amounts received and disbursed in financing activities. For
the year ended June 28, 2008, Sara Lee Corporation reported that cash had been reduced by over $1.8 billion as
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a result of its financing activities. Again, that is a lot of money leaving the company. What cash transactions are
specifically identified as financing activities?
Answer: Financing activities relate primarily to liabilities and shareholders’ equity in transactions that are
separate from the central, day-to-day activities of the organization. Cash inflows from financing activities usually
include issuing capital stock or incurring liabilities such as bonds or notes payable. Outflows are created by the
distribution of dividends, the acquisition of treasury stock, the payment of noncurrent liabilities, and the like.