What is an example of financing activities?

Financing activities refer to transactions that involve obtaining or repaying capital. These activities encompass actions that change the equity and debt structure of a company. Issuing shares and bonds is a prime example of financing activities because it represents the ways a company raises capital to fund its operations and growth. When a company issues shares, it is bringing in equity financing from shareholders. Similarly, when it issues bonds, it is securing debt financing from creditors. Both activities directly impact the cash flow related to financing, which is essential for the company’s liquidity and overall financial structure.

In contrast, the other options relate to operating or investing activities. Payments to suppliers fall under operating activities, as they pertain to the day-to-day operations of the business. Depreciation and amortization expense are accounting methods to allocate the cost of tangible and intangible assets over time, which again connects with operating activities. Lastly, buying equipment is considered an investing activity because it involves the purchase of long-term assets that will be used in the operations of the company.