Operating, Investing, and Financing Activities

Operating Activites

include cash activities related to net income. For example, cash generated from the sale of goods (revenue) and cash paid for merchandise (expense) are operating activities because revenues and expenses are included in net income.

Investing Activities

include cash activities related to noncurrent assets. Noncurrent assets include (1) long-term investments; (2) property, plant, and equipment; and (3) the principal amount of loans made to other entities. For example, cash generated from the sale of land and cash paid for an investment in another company are included in this category. (Note that interest received from loans is included in operating activities.)

Financing Activites

include cash activities related to noncurrent liabilities and owners' equity. Noncurrent liabilities and owners' equity items include (1) the principal amount of long-term debt, (2) stock sales and repurchases, and (3) dividend payments. (Note that interest paid on long-term debt is included in operating activities.)

Cash payments for purchases of merchandise

Operating

Cash receipts from sale of common stock

Financing

Cash payments for equipment

Investing

Cash receipts from sales of goods

Operating

Cash dividends paid to shareholders

Financing

Cash payments to employees

Operating

Cash payments to lenders for interest on loans

Operating

Cash receipts from collection of principal for loans made to other entities

Investing

Cash receipts from issuance of bonds

Financing

Cash receipts from collection of interest on loans made to other entities

Operating

Rent

Operating

Equitment

Investing

Dividens

Financing