Define the Cash Flow statement

Question 1

What does operating activities mean

Answer 1

cash flows related to day-to-day activites

Question 2

What does Investing activities mean

Answer 2

cash flows related to the purchase and sale of non-current assets

Question 3

What does financing activities mean

Answer 3

cash flows related to changes in the financial structure of the firm

Question 4

Why is it important a business has positive cash flow from operating.

Answer 4

It means the business is generating sufficient cash from its day-to-day trading activities. A negative flow from operating means the business has to take money away from investing and financing activities.

Question 5

Explain the possible relationship between net cash flow from financing and investing activities

Answer 5

Negative investing activities could mean financing cash flows are positive as the purchase of a non-current assets is financed by loans and/or capital