Question

If ABC Company raised capital by issuing (selling bonds) where would it appear on the cash flow statement and would cash flow increase or decrease:

Answer 1

Issue of bonds is a Financing activity and will be shown in the cash flow as Cash from financing activities.

Issue of bonds will increase the cash flow since cash is received by ABC Company against issue.

A pro forma of cash flow is given below to understand it better.

Bonds are long term liability of the company hence treated as a financing activity.

ABC Company
Cash flow Statement
For the Year ended December 31
Cash Flow from Operating Activities:
Net Income		XXXXX
Add: Adjustments
Depreciation Expense	XXXXX
Loss on sale of Equipment`	XXXXX
Increase in Accounts receivables	XXXXX
Decrease in Inventory	XXXXX
Increase in other Assets	XXXXX
Decrease in Accrued liabilities	XXXXX
Increase in Accounts payable	XXXXX
Decrease in Other Liabilities	XXXXX
		XXXXX
A. Cash Outflow from Operating Activities		XXXXX
B.Net cash used by investing activities		XXXXX
Cash flows from Financing activities
Proceeds from Bonds Issue	XXXXX
Payment of Dividend	XXXXX
Proceeds from Issue of Common stock	XXXXX
C. Net cash Used in financing activities		XXXXX
(A+B+C) Net increase (Decrease) in cash and Cash Equivalent		XXXXX
Add: Beginning cash Balance		XXXXX
Ending Cash Balance		XXXXX