The first major section of a typical statement of cash flows is "Operating Activities," and the first entry in this section is "Net Income." Then,also in the first section,we show some items that represent increases or decreases to cash,and the last entry is called "Net Cash Provided by Operating Activities." This number can be either positive or negative,but if it is negative,the firm is almost certain to soon go bankrupt.

Question

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Rapidly growing firms often require additions to inventory and receivables that are larger than net income,with the deficit being made up by borrowings and/or the sale of new stock.

The First Major Section of a Typical Statement of Cash