Which set correctly describes the three sections of a cash flow statement and what each shows?

• A. Balance sheet, income statement, and statement of cash flows.
• B. Cash, accounts receivable, and inventory.
• C. Operating activities, investing activities, and financing activities; operating shows cash from core operations, investing shows purchases/sales of long-term assets, financing shows issuance/repayment of capital and debt.
• D. Tax payable, depreciation, and interest expense.

Answer: (C)

The cash flow statement is organized into three sections: operating activities, investing activities, and financing activities. Operating activities show the cash generated or used by the business’s core operations—cash receipts from customers and cash payments to suppliers and employees—with adjustments for non-cash items like depreciation and changes in working capital. Investing activities capture cash flows from buying and selling long-term assets and investments, such as equipment, property, or securities. Financing activities reflect cash movements with owners and creditors, including issuing or repaying debt, issuing or repurchasing stock, and paying dividends. This framing matches how cash moves through a business, making it the best description of what each section shows. The other choices either refer to entire financial statements, list individual balance sheet items, or name specific accounts rather than the sections of the cash flow statement.