What are the three major cash activities included in a Cash Flow Statement?

What are the three major cash activities included in a Cash Flow Statement?

• A. Revenue, Expenses, Retained Earnings
• B. Investing, Financing, Accounting
• C. Operating, Investing, Financing
• D. Sales, Purchases, Loans

Answer: (C)

The three major cash activities included in a Cash Flow Statement are operating, investing, and financing. This structure helps users of financial statements understand the sources and uses of cash within a business over a specific period. - Operating activities involve the cash effects of transactions that enter into the determination of net income, such as cash received from customers and cash paid to suppliers and employees. - Investing activities include transactions involving the purchase and sale of physical and financial investments, such as acquiring fixed assets like machinery, or buying and selling securities. - Financing activities relate to how a company funds its operations and growth, which may involve borrowing, issuing stocks, or repaying debts. This classification provides a clear picture of how cash flows through a business, enabling stakeholders to assess its liquidity, financial health, and operational efficiency. This is why understanding operating, investing, and financing activities is crucial for anyone interpreting a Cash Flow Statement.

The three major cash activities included in a Cash Flow Statement are operating, investing, and financing. This structure helps users of financial statements understand the sources and uses of cash within a business over a specific period.

• Operating activities involve the cash effects of transactions that enter into the determination of net income, such as cash received from customers and cash paid to suppliers and employees.

• Investing activities include transactions involving the purchase and sale of physical and financial investments, such as acquiring fixed assets like machinery, or buying and selling securities.

• Financing activities relate to how a company funds its operations and growth, which may involve borrowing, issuing stocks, or repaying debts.

This classification provides a clear picture of how cash flows through a business, enabling stakeholders to assess its liquidity, financial health, and operational efficiency. This is why understanding operating, investing, and financing activities is crucial for anyone interpreting a Cash Flow Statement.