What are the three sections of the statement of cash flows and what does each show?

What are the three sections of the statement of cash flows and what does each show?

• A. Investing activities show cash from core business.
• B. Financing activities (borrowing and equity transactions) alone.
• C. Non-cash activities include many items.
• D. Operating activities (cash from core business), Investing activities (buying/selling long-term assets), Financing activities (borrowing and equity transactions).

Answer: (D)

The statement of cash flows is organized into three sections that reveal different sources and uses of cash. Operating activities show the cash effects of the company’s core business operations—cash received from customers and cash paid for expenses, with adjustments for noncash items and changes in working capital. Investing activities track cash flows from buying and selling long-term assets and investments, such as property, equipment, and marketable securities. Financing activities capture cash flows related to borrowing, repaying debt, issuing stock, and paying dividends. That description matches the option that lists operating activities (cash from core business), investing activities (buying/selling long-term assets), and financing activities (borrowing and equity transactions). The other choices misstate one or more components—for example, treating investing as cash from the core business, or describing financing as the only component, or focusing on non-cash items rather than the three cash-flow sections.

The statement of cash flows is organized into three sections that reveal different sources and uses of cash. Operating activities show the cash effects of the company’s core business operations—cash received from customers and cash paid for expenses, with adjustments for noncash items and changes in working capital. Investing activities track cash flows from buying and selling long-term assets and investments, such as property, equipment, and marketable securities. Financing activities capture cash flows related to borrowing, repaying debt, issuing stock, and paying dividends.

That description matches the option that lists operating activities (cash from core business), investing activities (buying/selling long-term assets), and financing activities (borrowing and equity transactions). The other choices misstate one or more components—for example, treating investing as cash from the core business, or describing financing as the only component, or focusing on non-cash items rather than the three cash-flow sections.