As described
before a cash flow statement is categorized in a number of sections. These
sections include a section of operating activities, section of financing
activities, section of investing activities and supplemental information about
the cash generated and used in a company.
Operating Section of the Cash Flow
Statement
This section
measures the cash inflow and outflow as a result of the operating activities of
the business. This section describes that how much cash is produced from the
sales of products and services of a company. Operational section focuses on the
cash received from and utilized in the accounts receivable, depreciation of the
firm, accounts payable and inventory of a company. The cash flow is determined
by making a few adjustments in the net income from the operating activities.
These adjustments include managing the differences in revenue, reviewing the
expenses and adjusting the credit transactions that appear on the balance sheet
and the income statement of a firm. Items that are added in operating section
of the cash flow include receipts from the sales of goods and services,
receipts from loans, received amount of interest on loans, payment to the
suppliers, salaries and interest payments of the firm. Items that are
subtracted from the net income include deferred taxes, depreciation and
amortization of the firm.
Financing Section of the Cash Flow
Statement
The
financing section of the cash flow statement involves the changes and
transformation in debt, dividend that is paid to the share holders, proceeds
that are issued from the long term or short term debt. Other financing
activities involve repurchasing of the shares of the company, repayment of the
capital leases along with debt principle and receipts of donor received cash
etc.
Investing Section of the Cash Flow
Statement
Investing
section of the cash flow statement deals with the transformation in the assets
and equipments of a company. This section includes cash inflow and outflow as a
result of purchasing or selling a property, land, building and marketable
securities. Moreover the loan made to the suppliers or received from the
customers is also included in the investing activities. In addition to that the
payment related to the mergers and acquisitions of the various companies is
also included in the investing section of the cash flow statement.
