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Cash Flow from Operating Activities

The cash flow statement begins with the operating activities section. Operating activities generally reflect cash generated and/or paid as a result of the firm’s core business functions. This part of the cash flow statement is the cash counterpart to income from operations as reported on the income statement. As such, it provides a useful comparison and contrast to the accrual accounting measures on the income statement, potentially highlighting effects of accrual accounting assumptions. Under U.S. GAAP, this category incorporates the cash received from customers, paid to suppliers, paid for operating costs, paid for income taxes, received from interest or dividends, and paid for periodic interest costs.

While cash payments for interest are included in the operating activities section, under U.S. GAAP, dividends paid out to equity capital holders are reported in the financing section. Therefore, interest payments and dividend payments appear in different sections of the cash flow statement under U.S. GAAP. IAS handles this issue differently, allowing the reporting company the option of including both interest and/or dividends in either operating or financing activities.

For more information, see all articles on: Accounting, Financial Statement Analysis, Fundamental Analysis

See also:
  • Cash Flow Statement - The Indirect Method
  • The Statement of Cash Flows
  • Cash Flow Statement - The Direct Method
  • Cash Flows from Financing Activities
  • Cash Flows from Investing Activities
  • The Theory of Corporate Finance

    The Intelligent Investor: The Classic Text on Value Investing

    Financial Statement Analysis: A Practitioner's Guide, 3rd Edition

    Managing Investment Portfolios: A Dynamic Process (CFA Institute Investment Series)

    3 Responses to “Cash Flow from Operating Activities”

    1. EBITDA as an Estimate of Operating Cash Flow - Financial Education - Everything You Need To Know About Finance Says:

      [...] that this shortcut estimate of cash flows from operations is considerably higher than the actual cash flow from operations in all three years. Clearly the adjustments for working capital and other non-cash items are very [...]

    2. COH: Coach Earnings In Line, Lack of Outlook Disappointing | Stock Market Beat Says:

      [...] survivable. With an enterprise value of just under $10 billion and $679 million in free cash flow (cash from operations less capital expenditures) over the last 12 months, its free cash flow yield of 6.8% offers a 400 [...]

    3. MSTR: Why Were Investors Surprised by MicroStrategy Miss? | Stock Market Beat Says:

      [...] software balance increased by $1 million. Had the development costs been expensed as incurred, cash from operations would have been $2.7 million (4%) lower and net income would have been $641,000 ($0.05 per share) [...]

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