Economics Capital Budgeting Questions
The difference between cash flows from operations and cash flows from financing activities lies in the source of the cash inflows or outflows.
Cash flows from operations refer to the cash generated or used in the normal course of business operations. This includes cash received from customers for sales, cash paid to suppliers for inventory, cash paid to employees for wages, and other operating expenses. It represents the cash flow resulting from the core revenue-generating activities of a company.
On the other hand, cash flows from financing activities pertain to the cash inflows or outflows related to the company's financing and capital structure. This includes cash received from issuing debt or equity, cash paid for dividends or interest on debt, and cash used for repurchasing shares or paying off debt. It represents the cash flow resulting from the company's financing decisions.
In summary, cash flows from operations reflect the cash generated or used in the day-to-day operations of a business, while cash flows from financing activities represent the cash flow resulting from the company's financing decisions and capital structure.