Classifications

In this lesson

1. 0:00 Cash flow classifications overview
2. 0:16 Operating activities explained
3. 0:59 Direct versus indirect methods
4. 2:26 Calculating cash from operations
5. 3:33 Investing activities defined
6. 4:34 Financing activities explained
7. 5:22 Interest and dividend treatment

About this lesson

Understanding these classifications is essential for preparing statements of cash flows, a key component of Financial Reporting (FR) and Strategic Business Reporting (SBR) papers. The video covers operating activities—your principal revenue-generating transactions—and explains the two methods for calculating cash generated from operations. The indirect method, which adjusts profit before tax for non-cash items and working capital changes, is more commonly used because it's simpler to produce. You'll see how to handle depreciation, changes in receivables and payables, and other adjustments step by step. You'll also learn to identify investing activities, which are expenditures on assets intended to generate future income, such as purchases and sales of property, plant and equipment. The lesson then covers financing activities, which change the composition of borrowing and equity—including share issues, loan proceeds, and debt repayments. Finally, you'll understand how to treat interest and dividends consistently across periods to ensure your cash flow statement is comparable and compliant with standards.

Duration: 6m