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Understanding cash flows is a key factor in identifying how a business is performing. Using your...

Understanding cash flows is a key factor in identifying how a business is performing. Using your own words, identify the difference between operating, investing, and financing cash flows. Also identify why each one is important to a business.

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Answer #1

A cash flow statement is a listing of cash flows that occurred during the past accounting period.This  is a listing of the flows of cash into and out of the business or project. Think of it as your checking account at the bank. Deposits are the cash inflow and withdrawals (checks) are the cash outflows. The balance in your checking account is your net cash flow at a specific point in time.

Operating activities: records a company's operating cash movement

Investing activities: records changes in cash from the purchase or sale of assets.

. Financing activities: reports cash level changes from the purchase of a company’s own stock or issue of bonds, and payments of interest and dividends to shareholders

Cash flow statements help with financing decisions.

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