• The cash flow statement is divided into three sections:
o Cash flow from operating activities: shows the results of cash inflows and outflows related to the fundamental operations of the basic line or lines of business in which the company engages. (Example: cash receipts from the sale of goods or services and cash outflows for purchasing inventory and paying rent and taxes.)
o Cash flow from investing activities: associated with purchases and sales of non-current assets (Example: building and equipment purchases or sales of investments or subsidiaries.)
o Cash flow from financing activities: associated with financing the firm (Example: selling and paying off bonds and issuing stock and paying dividends)
o Cash flow from operating activities: shows the results of cash inflows and outflows related to the fundamental operations of the basic line or lines of business in which the company engages. (Example: cash receipts from the sale of goods or services and cash outflows for purchasing inventory and paying rent and taxes.)
o Cash flow from investing activities: associated with purchases and sales of non-current assets (Example: building and equipment purchases or sales of investments or subsidiaries.)
o Cash flow from financing activities: associated with financing the firm (Example: selling and paying off bonds and issuing stock and paying dividends)
• Exceptions
o Short-term marketable securities are treated as long-term investments and appear in cash flow from investing activities
o Short-term debt is treated as long-term debt and appears in cash flow from financing activities
o Although dividends are handled as a cash outflow in the cash flow from financing activities section, interest payments are considered an operating outflow, despite the fact that both are payments to outsiders for using their money.
