Future Business Leaders of America (FBLA) Agribusiness Practice Test

What does the statement of cash flows display?

1. Net income versus expenses

2. Operating, investing, and financing activities

3. Sales and revenue generation

4. Owner's equity variations

The correct answer is: Operating, investing, and financing activities

The statement of cash flows displays the operating, investing, and financing activities of a business. This financial statement provides crucial insights into how cash is generated and used over a specific period. The operating activities section details the cash inflows and outflows from the core business operations, showcasing the cash that is produced from or spent on regular revenue-generating activities. The investing activities section outlines cash transactions for the purchase and sale of physical and financial investments, which can indicate how a company is allocating its resources for future growth. The financing activities section reveals cash transactions related to borrowing and repaying debts, as well as obtaining and distributing equity, highlighting how a company finances its operations and growth initiatives. Together, these three categories provide a comprehensive view of cash flow, which is essential for assessing a company's liquidity, solvency, and overall financial health. Understanding these aspects is vital for both internal management and external stakeholders looking to evaluate the financial viability and operational efficiency of the business.