Which activities are included under operating activities in a cash flow statement?

Operating activities in a cash flow statement refer to the primary activities that generate revenue and expenses for a business as part of its core operations. These activities encompass the cash inflows and outflows associated with the day-to-day trading activities of the business, including cash received from sales of goods or services, and cash payments to suppliers and employees.

The correct answer focuses specifically on these continuous activities essential for maintaining the business operations, reflecting how cash is generated and utilized in the normal course of running the business. Operating activities are crucial because they provide insights into the company’s operational efficiency and its ability to sustain its cash flow from its core business functions. This section also helps stakeholders understand how well the business manages its cash flow to support ongoing operations.

In contrast, cash flows from investing non-current assets relate to the acquisition and disposal of long-term assets, which are categorized as investing activities. Cash flows related to financing arrangements involve raising funds through debt or equity and are classified under financing activities. Cash used for non-operating purposes does not reflect the main operational cash flow and would typically fall outside of the definition of operating activities. Each of these categories plays a significant role in the financial health of a business, but they are distinct from the operating activities that focus on the routine