Why do operating activities appear first on the statement of cash flows?
Operating activities are presented first on the statement of cash flows because of the importance that net cash has on the usefulness of the financial statement. One of the main objectives of a statement of cash flows is to help investors, and other users of a firm’s financial statements, with determining the firm’s ability to generate future cash flows; the firm’s ability to meet current obligations, including repaying creditors and paying dividends to investors; the firm’s reasoning for the difference between net income and net cash flow from operating activities; and to detail the firm’s investments and financing transactions. One reason that operating activities are considered to be most important to financial data users, is that operation activities show precisely how much money was generated through the firm’s operations during the period. A firm’s ability to continue with future operations weighs highly on its ability to generate revenue based on its main operations. Because of
