The article focuses on how cash flows from operating activities are calculated and reported. It also briefly explains the three main cash flows streams reported under International Accounting Standard (IAS) 7 which are:
- cash flows from operating activities
- cash flows from investing activities
- cash flows from financing activities
Cash flows from operating activities represent cash from the day-to-day business operations, such as paying suppliers, cash paid on wages and salaries, cash paid to acquire inventory, cash paid on utilities and business supplies and cash received from customers.
Cash from investing activities represent cash flows from acquisition or disposal of fixed assets. Cash flow from financing activities represent cash flows from recruiting financial resources, such as issuing new share capital or long-term borrowing money from lenders or banks. Financing activities also include cash flows on the repayment of the loan principal or cash flows on redeeming both ordinary share capital and preference share capital.