Operating Activities- This includes, very basically, all your business’s day-to-day activities,
including receivables, payable, credit cards, lines of crest, etc. . This does not include loan
principal payments and purchases of depreciable assets. Generally, this category is a
source of cash (provides cash) when you collect on your receivables and show a profit
(earn more than you spend) . It is a use of cash (depletes cash) when you don’t collect
receivables and/or aren’t profitable (spend more than you earn). Investing Activities –
Investing includes all the purchases of depreciable assets (Vehicles, Equipment, etc) that
you make. It can also include some of the funds received when those assets are sold. It is a
use of cash when you buy an asset, and can provide cash when you sell them. When
buying assets you must consider first how you will pay for it. If you pay for it with cash,
that cash comes out of Operating Activities (so you’d better be collecting those
receivables). If you take out a loan, the money comes from Financing Activities – the next
category. Financing Activities – In a small business, a major source of cash from financing
activities is the money received from a long term loan, which is used to buy an asset. If
you don;t have enough funds available from Operating Activities, you can finance the
purchase and pay the money back over time. One of the main uses of cash in this category,
then, includes paying back the principal on those loans. The other is paying distributions,
or draws, to owners. – See more at:
http://www.summitservicesinc.com/blog/article/the_3_sources_and_uses_of_cash#sthash.c
FBsxPWp.dpuf