‘Investing activities’ means purchases or sales that will benefit the business in the long term.
A cash deficit means losing more money than your gaining.
A) If investing activities have cash deficit it may be caused by investment in a fixed asset e.g a piece of property or equipment.
It’s good if the money made from operating activities can make up for the investment, however if the fixed asset does not expand the business or generate money in the long term then cash deficit was bad-a waste of money.
Operating activities’ means actions a business has to take to get its goods/ services on the market. E.g paying workers their salaries or paying for necessary materials.
Operating activities are all the expenses that take away from the business’s net income ( total revenue minus all costs, taxes included )
B)Cash deficit in operating activities could be caused by a decrease in revenue or an increase of the price of materials as this decreases the net income, meaning you have less money to spend on operating activities.
This is very bad.It means the business will have little growth and cause a lower inventory turnover.( the ratio that shows the balance between how much a product has been sold versus how much a product has been replaced in a period of time)
Financing activities means when a business gives money to its investors or owners in the hopes of achieving growth. E.g debt, equity and dividends.
C) cash deficit in Financing activities could be caused by paying off long-term debt or making a dividend payment to shareholders.
This is bad because it means the company is consistently issuing new stock or taking out debt; a sign of poor investment.