Cash Flow Activities

22 يونيو, 2023

The 3 Cash Flow Activities: A Comprehensive Overview

1. Operating Activities

📄 Definition:

Operating activities represent the primary source of cash for a company. These activities encompass various financial transactions such as the purchase and sale of inventory, receiving payments from debtors, making payments to creditors, and covering day-to-day expenses.

➕ Cash inflows:

Operating activities generate cash inflows through multiple channels, including:

- Revenue from sales

- Commission and fees earned

- Additional income sources

- Royalties

- Subventions and grants

➖ Cash outflows:

Conversely, cash outflows associated with operating activities include:

- Payment for inventory purchases

- Expenditure on operating expenses

- Tax payments

- Payments to creditors

- Wages and salaries disbursements

2. Investing Activities

📄 Definition:

Investing activities involve cash changes resulting from the acquisition, sale, or disposal of tangible fixed assets, as well as changes in investments made by the company. This category also includes activities such as investing in shares or securities of other companies.

➕ Cash inflows:

Investing activities can generate cash inflows through the following:

- Proceeds from the sale of assets

- Maturity of fixed deposits

- Sale of investments

- Interest received

- Dividends received

➖ Cash outflows:

On the other hand, cash outflows within investing activities encompass:

- Capital expenditure (CAPEX) acquisitions

- Property purchases

- Investments in fixed deposits

- Purchase of additional investments

3. Financing Activities

📄 Definition:

Financing activities primarily involve cash changes resulting from obtaining financing and settling financial obligations, including loan repayments and issuing shares.

➕ Cash inflows:

Financing activities generate cash inflows through:

- Proceeds from the issuance of shares

- Funds obtained from loans

➖ Cash outflows:

Cash outflows associated with financing activities include:

- Repayment of loans

- Repurchase of the company's stock

- Cash dividends

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