Explain the value of separating cash flows into operating activities, investing activities, and financing activities to financial statement users in analyzing cash flows and the company's financial performance and condition.
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//Prior to writing for this query, we must be aware about accounting concepts such as cash flow, financial statement, financial performance, etc. We are required to explain the value of separating cash flows into operating, investing & financial activities to financial statement. I have developed an understanding on these points. See the text below: //
Cash flows from operating, investing and financing activities
The users of the financial statements include the management, the shareholders, the short as well as long term creditors, trade unions, taxation authorities, government and their agencies, stock exchange members, researchers and public at large. While preparing a cash flow statement, cash flows are classified into three heads; operating, investing and financing activities. (Chaturvedi & Agrawal, 2002)
For the management, the cash flows from operating activities tell about the performance of the business and its effectiveness in its operations. Cash flows from investing ...
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