Of the three categories on the statement of cash flows, which do you think provides the most useful information? Explain

Business Dec 28, 2020

Of the three categories on the statement of cash flows,

which do you think provides the most useful information? Explain.

Expert Solution

The three categories on the cash flow statement are:

Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities

And the most important among these is the first section that tells about the cash flows from operating activities. It is from the main operations of the business, we determine the operating cash flow which can be further used to make investments. If the main operations are not resulting in a profit, then there is no point in making investments or financing capital. Hence, the first section is most important compared to the other two activities. The other two activities are also important but do not form part of the main business operations.

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