Final answer:
The clear distinction between operating and financing activities allows for a better understanding of a company's financial health and strategy in the face of market imperfect information.
Step-by-step explanation:
The motivation for having a clear distinction between operating activities and financing activities lies in the transparency and understanding of a company's financial health. Operating activities include the core business functions, whereas financing activities pertain to how the company funds its operations and growth, including decisions about raising financial capital. Privately owned firms seek to earn profits, which is the difference between revenues and costs, taking into account both explicit and implicit costs. They raise financial capital through means such as early-stage investors, reinvesting profits, borrowing, and selling stock. This separation allows stakeholders to assess the firm's operational efficiency and its financial strategy, considering the imperfect information available in the market.