From the course: Financial Accounting Part 2
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Review of the statement of cash flows
From the course: Financial Accounting Part 2
Review of the statement of cash flows
- Let's take a quick look at the third primary financial statement, the statement of cash flows. Conceptually, the statement of cash flows is quite simple, cash in, cash out. The insight of accountants is to separate those cash flows into three categories. Operating activities, investing activities, and financing activities. Those three categories of cash flows are what are reported in the statement of cash flows. Now, operating activities are what companies do every single day. They collect cash from customers, they pay cash to buy inventory, they pay cash to employees, they pay cash for rent, advertising, for research and development. All of those things are operating activities. Think of operating activities as the things that a business does every single day, and hopefully a company would generate cash from its operating activities. You would hope that a business would be collecting more cash than it's spending…
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