Classification of Cash Flows

This statement classifies cash receipts and cash disbursements by operating, investing, and financing activities. The operating activities take into consideration the cash effects of transactions that enter into the determination of net income: cash receipts from sales, payments to vendors, employees, advertising services, costs of goods sold, etc. Investing activities are related to long-term assets such as making and collecting loans and acquiring and disposing of investments, example, and available-for-sale securities. Within the financing activities are included liabilities and stockholders’ equity items. Examples are borrowing money, repaying loans, obtaining loans from stockholders and paying them a return on their investment.