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Are loans made to other businesses recorded in the investing or financing section?

If a company loans money (cash outflow) to another independent company or entity, then the activity would be recorded in the investing section of the cash flow statement. This captured in #2 in the visual below. The rationale is that the company will get a return in the form of interest on the loan, which qualifies the loan as an investing type activity.

If the company were to borrow money from another company, the cash inflow would be recorded as a financing activity.


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