Investing and Financing

Picture: Illustration investing

Investing and Financing. Most of the businesses these days borrow money either in short terms or long terms basis.

The majority of cash flow statements illustrate the increase and decrease of the earnings of the short term debt only. It does not report the total amount that are either borrowed or paid.

On the other hand, when illustrating a long term debt, the total amount and the reimbursements of the long term debt must be indicated in the cash flow statement on a yearly basis. The figures on these cash flow statements are illustrated on gross not net figures.

Similar to businessmen, most of todays businesses must find a way to finance its acquisitions when the business internal flow of cash is insufficient or is inadequate to provide financial support in order to for the business to grow.

When we say financing, it usually means the funding of a business capital from debt and equity sources. And by borrowing money from financial institutions or banks, in order to loan money to the business, or by providing extra funds in the business.

The tenure also includes the other side of the coin, meaning doing payments on the balance due and returning the principal to the owners. It also includes the monetary distributions by the company from the income to its owners.

Read Also: 10 Ten Bookkeeping Mistakes Made By Small Business Owners

Investing and financing nex

In addition to that, another section of the statement of the monetary flow illustrates the ventures that the business has acquired during the annual report.

New and additional ventures signify the growth of the production and distributing capability of the business, as well as its improvements and enhancements.

Organizing long term assets or removing a key component of the business can create good or bad effects, depends on what is influencing the said actions.

Some companies will dispose some of its predetermined assets on a yearly basis upon reaching the limit of their usefulness because they will become more of a liability than an asset.

These predetermined assets are either disposed or put on the market, or in most cases, traded for newer predetermined assets. The appraisal of the fixed assets or predetermined assets that is at the end of its usefulness is called the fixed assets salvage value.

The profits of the fixed assets are accounted as a source of money in the investing activities segment of the statement of the business monetary flow. The proceeds of these fixed assets are generally diminutive in quantity. (*)