What information can a potential investor obtain from the ca

Solution

Answer:

The following information can a potential investor obtain from the cash flows operating activities:

1. The primary purpose of the statement of cash flows is to provide information about cash receipt, cash payments,and the net change in cash resulting from the operating,investing,and financial activities of a company during the period.

Cash flow from operating activities(CFO) is an accounting item that indicates the amount of money a company brings in from ongoing , regular business activities, such as manufacturing and selling goods or providing a service.Cash flow from operating activities does not include long term capital or investment costs.

CFO can be calculated as follows:

Cash flow from operating activities=EBIT+ Depreciation-Taxes+/-Change in Working Capital

It is also known as operating cash flow or net cash from operating activities.