In: Operations Management
TOPIC 1: Companies are required to classify cash flows as operating, investing, or financing. Which of these three categories do you think will most likely have a net cash outflow over a number of years? Explain your answer.
TOPIC 2: Which method of preparing the Operating Activities section of the statement of cash flows, the direct or the indirect method, do you believe provides more information to users of the statement? Explain your answer.
Answer: Cash flows are classified as operating, investing, or financing activities on the statement of cash flows, depending on the nature of the transaction. Each of these three classifications is defined as follows.