UNDERSTANDING ACCOUNTING TALK 27 The Cash Flow Statement: Operating Activities

The Cash Flow Statement is broken down into: Operating Activities, Investing Activities, Financing Activities.

Operating Activities generally reflect the effect on Cash of Net Income or Net Loss. The Cash from Net Income is decreased by an increase in Accounts Receivable or an increase in Inventory. It is increased by a decrease in Accounts Receivable or a decrease in Inventory.

Of course, a Net Loss decreases Cash from Operating Activities. This decrease is aggravated by an increase in Accounts Receivable or Inventory.

An increase in Accounts Payable improves the Cash from Operating Activities, while a decrease aggravates.