17/06/2025
CASH FLOW STATEMENT (EXPLANATION)
A cash flow statement is a financial statement that provides information about the cash inflows and outflows of a business during a specific period. It shows how changes in balance sheet accounts and income affect cash and cash equivalents. The statement is divided into three main sections: operating activities, investing activities, and financing activities. Here's a breakdown of each section:
1. Operating Activities:
- This section reports the cash flows from the day-to-day operations of the business. It includes cash inflows and outflows directly related to the primary revenue-generating activities of the company.
- Cash inflows from operating activities can come from sources such as customer payments, interest received, or dividends received from investments.
- Cash outflows from operating activities include payments to suppliers, employee wages, taxes, interest paid, and other expenses directly related to the operation of the business.
- The net cash provided or used by operating activities is calculated by deducting cash outflows from cash inflows.
2. Investing Activities:
- This section reports the cash flows related to investments in long-term assets and other investment activities.
- Cash inflows from investing activities can include proceeds from the sale of assets, interest or dividends received from investments, or the return of loans made to others.
- Cash outflows from investing activities include the purchase of property, plant, and equipment, investments in other companies, or loans made to others.
- The net cash provided or used by investing activities is calculated by deducting cash outflows from cash inflows.
3. Financing Activities:
- This section reports the cash flows related to financing the business, such as obtaining funds from investors or repaying debt.
- Cash inflows from financing activities can include proceeds from issuing stock, obtaining loans or credit, or receiving