From the course: Running a Profitable Business: Understanding Financial Ratios
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The statement of cash flows
From the course: Running a Profitable Business: Understanding Financial Ratios
The statement of cash flows
- Third primary financial statement is the statement of cash flows. Conceptually, a statement of cash flows is quite simple. Cash in, cash out. The insight of accountants is to separate those cash flows into three categories. Operating activities, investing activities, and financing activities. Those three categories of cash flows are what are reported in the statement of cash flows. Operating activities are what companies do every single day. Collect cash from customers, pay cash to buy inventory, pay cash to employees, pay cash for rent, for advertising, for research and development. All those things are operating activities. Think of operating activities as the things that a business does every single day. And hopefully a company would generate cash from its operating activities. You would hope that a business would be collecting more cash than it's spending on a daily basis. The second category in the statement of cash…
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