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INVESTING ACTIVITIES

Cash flow from investing activities comes in a variety of forms. Business may receive money from investors, or distribute money to investors. The term “investor” may include both the company’s shareholders and its debtors. Cash flow from investing activities happens when a company pays interest to creditors or dividends to stockholders. These are examples of cash outflows. Paying down, or decreasing, outstanding debt is another investing activity that results in a cash outflow. Inflows of investment dollars may come from increasing outstanding debt or reissuing stock. Less common forms of cash flow from investing include the sale of interest-bearing, short term bank notes, and other forms of interest –bearing liabilities.

OPERATING ACTIVITIES

Cash flow from operating activities detail cash receipts and payments from normal business operations. Cash received from sales revenue, interest, and dividends belong to one important category in this area. On the other side, cash disbursements represent payments from operating and interest expenses. Cash flow from operating expenses is often important as companies must generate cash from these activities to remain in business.

FINANCING ACTIVITIES

When reporting cash flow from financing activities, the section is usually the last one reported on the statement of cash flows. In most cases this section has the least amount of activity among the three sections. Cash flow from financing activities only occurs when a company seeks funds from outside sources for operating the business. Loans and stock are the two primary sources. Cash inflows represent any payments a company receives from outside sources. Cash flow from financing activities reports these actions as a plus to the company’s cash account for the exact dollar amount received from either source. Outflows reported on the statement of cash flows in the financing section are essentially the opposite of the cash inflow items.