Ace the AFP Exam 2025 – Boost Your Financial Wizardry!

The main components of the cash flow statement include operating activities, investing activities, and financing activities. This classification is essential as it delineates how cash is generated and used within a business during a specific period.

Operating activities reflect the cash transactions that arise from the core business operations, such as receipts from sales of goods and services, and payments to suppliers and employees. This section provides insight into the company’s ability to produce cash through its operations.

Investing activities cover the cash flow related to the acquisition and disposal of long-term assets, such as property, equipment, and investments in other companies. This section is crucial for understanding how much a company is investing in its future growth and can indicate its strategic direction.

Financing activities encompass cash flows that result from transactions with the company’s owners and creditors. This includes issuing or buying back shares, borrowing, and repaying debt. Understanding these transactions is vital for evaluating how the company finances its operations through debt versus equity.

The other options listed, such as net income, revenue, expenses, and the balance sheet elements of assets, liabilities, and equity, pertain to different aspects of financial reporting. While these elements play significant roles in financial analysis and reporting, they do not represent the direct components found within