Q14-3RQ
Question
Question: Describe the three basic types of cash flow activities.
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Answer
The three basic types of cash flow activities are operating activity, investing activity, and financing activity.
1Step 1: Operating Activity
Operating activity records depreciation, depletion, operating revenue and expenses, increase in assets and liabilities, and decrease in assets and liabilities. The operating activity calculation starts with the net income.
2Step 2: Investing Activity
It includes cash receipts from and payment to sale and purchase of plant, property, and equipment, and long-term notes receivables. Investing activity only records, long-term assets.
3Step 2: Financing Activity
Financing activity records equity and long-term liabilities. It also records payments toward interest on debt and dividends to stockholders.
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