What is included in Cash Flows from Operating Activities?

Cash Flows from Operating Activities primarily focus on the income-generating activities of a company. This section of the cash flow statement is concerned with the cash transactions related to the operational aspects of the business, such as revenues and expenses.

Net income adjustments are crucial in this context because they represent the starting point for determining cash flows from operating activities when using the indirect method. This method adjusts net income for non-cash items, such as depreciation and changes in working capital accounts (accounts receivable, accounts payable, inventory, etc.) to reflect the actual cash generated or used in operations. This ensures that the cash flow statement accurately reflects the cash impact of operating activities over the period.

In contrast, other options involve different aspects of financial activities. Changes in long-term assets relate more to investing activities, changes in equity pertain to financing activities, and cash outflows for dividends represent distributions to shareholders, which also classify as financing cash flows. Therefore, the focus on adjustments to net income makes this choice the correct response concerning Cash Flows from Operating Activities.