Statement of cash flows is classified as to activity. The three major classifications are: cash flows from operations, cash flows from investing activities, and cash flows from financing activities.
Cash Flows from Operations present cash flows that are derived primarily from the principal revenue producing activities of the company. It is composed of the following:
Net income/loss self explanatory
Adjustments to net earnings. Net income/loss includes noncash expenses such as depreciation expense. These noncash items such as depreciation expenses are added back to net earnings because no cash was paid for depreciation. Conversely, interest income where no cash was received are deducted in the net earnings.
Adjustments for working capital changes. Working capital as defined in the balance sheet terminologies are current assets and current liabilities.
Cash flows from investing activities present cash flows from transactions involving long term assets and other investments. Acquisition of properties like land and purchase of bonds or stocks with no intention to sell within a year are considered investing activities.
Cash flows from financing activities present cash flows derived from issuance of equity or borrowing of the company. Dividends paid, issuance of shares, and acquisition of loans are presented in this section.