Why is the operating activities section of the statement of cash flows often believed to be the most important part of the statement?
A) Because it shows the dividends that have been paid to stockholders.
B) Because it indicates a company's ability to generate cash from sales to meet current cash payments for goods or services.
C) Because shows the net increase or decrease in cash during the period.
D) Because it gives the most information about how operations have been financed.

Question

Quizplus · Accepted Answer

The operating activities section of the statement of cash flows provides important information about a company's ability to generate cash from its primary business operations. This is crucial as it reflects the company's ability to pay its current obligations, invest in future growth, and pay dividends to shareholders. The other options are not accurate as the operating activities section does not provide information about dividends paid, net increase or decrease in cash, or how operations have been financed.

Why Is the Operating Activities Section of the Statement of Cash