Question

List two types of cash flows an investor can expect to receive from an investment in stock. Explain the volatility of each of these types of cash flows.

Answer 1

Operating cash flows which are activities that include a company’s day-to-day activities, for example, purchasing raw material or making sales. Investing cash flows are activities that include purchases and sales of long term assets and other investments.

Answer 2

Transactions must be segregated into the three types of activities presented on the statement of cash flows: operating, investing, and financing.