What are the three major cash activities included in 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.