In which activities does a statement of cash flows classify cash transactions?

The statement of cash flows classifies cash transactions into three primary categories: operating, investing, and financing activities. This classification provides a clear view of how cash is generated and used within a business during a specific period.

Operating activities involve the cash generated or spent on the day-to-day operations of the business, including cash receipts from customers and cash payments to suppliers and employees. This is crucial for assessing the company's ability to generate cash from its core business operations.

Investing activities relate to the acquisition and disposal of long-term assets, such as property, equipment, and investments in other companies. These transactions help to show how much the company is investing for future growth.

Financing activities encompass transactions that affect the equity and debt structure of the company, including issuing stocks, borrowing funds, and repaying loans. This section helps stakeholders understand how a company finances its operations and growth.

Each of these categories plays a vital role in understanding the cash flow dynamics of a business, making the correct choice the one that accurately identifies these three key classifications.