Question

The three sections of the cash flow statement include operating activities, financing activities, and investing activities. The investing activities show funds that are flowing into the business which are generated by the primary business activity of the company. This is why investing activities are considered to be a report of the “lifeblood of the company”.

Select one:

True

False

Answer 1

The cash flow statement consists of three categories.

                                                                                                                                               

1.Cash flow from operating activities:

This is the cash flow from the primary business activity of buying and selling goods and services.

2.Cash flow from investing activities:

This is the cash flow from purchase and sale of assets.

3.Cash flow from financing activities:

This is the cash flow from selling stocks and bonds and paying dividends.

Activities that show funds that are flowing into the business which are generated by the primary business activity of the company are operating activities and not investing activity. Therefore, the statement is false.