completion: understanding the three sections of the cash flows statement

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Cash flow statement

There are three types of activities which result in cash movement and those activities are explained below:

A. Cash from operating activities: Change in cash occurring due general business activities get recorded under cash from operating activities. The general business transactions in cash like rent payments, vendor payments, receipts from debtor, tax payment, salary payment, additions to accrued income and other relates direct or indirect business expenses.

B. Cash from investing activities: The ‘cash in’ and ‘cash out’ activities which are related to long term asset positions are classified as cash from investing activities. The activities like sale or purchase of plants, equipment, any mergers and acquisitions, sale or purchase of marketable securities basically result in cash from investing activities.

C. Cash from financing activities: The ‘cash in’ and ‘cash out’ activities which are related to long liabilities are classified as cash from financing activities. The activities like raising equity capital, repayment of debt, proceeds of debt capital, repayment of leases basically result in cash from investing activities.

In above we have broadly covered three sections of cash flow statement.

jeff jeffy answered 1 year ago

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