The statement of cash flows is typically classified into three main sections:
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Operating Activities: This section includes cash flows from the core business operations, such as cash receipts from customers, cash payments to suppliers and employees, and other cash transactions that affect net income. It can be presented using either the direct method (showing cash receipts and cash payments) or the indirect method (adjusting net income for non-cash transactions and changes in working capital).
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Investing Activities: This section reports cash flows related to the acquisition and disposal of long-term assets and investments. Examples include cash payments for purchasing property, plant, and equipment, and cash received from the sale of assets and investments.
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Financing Activities: This section reflects cash flows that result from transactions with the company’s owners and creditors. It includes cash inflows from issuing shares or borrowing, as well as cash outflows for dividends paid and repayment of debt.
These sections together provide insight into a company's cash generation and usage over a specific period, helping stakeholders assess its liquidity, solvency, and financial flexibility.