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If we have to say that, cash flow of firm is POSITIVE, which head(Operating,Investing,Financing)will be more?Why you say so?
Cash flow of firm is POSITIVE, implies that the net of Operating, Financing and Investing is positive which is one of the indicators of good health of the firm.
Operating, Financing and Investing are the three broad functions from cash point of view, which a company does. These are naturally integral part of a business. You run your operations and pay cash for raw materials, etc. and recieve cash by selling, also you take debt and pay interest that is Financing and you invest your surplus cash thats Investing.
So its not a question of which should be more, it depends on the life stage of the company, the strategic path it has taken.
In general the net of all these three activies should be positive.
The division is necessary to show the stakeholders that how company is managing its operations. Where company is investing its funds and what are the financing sources.
The operating section is the most important as company must generate positive cash flows from its business operations. Then it will be in a position to invest its free cash flow in different profitable ventures or company expansion.
Some extend it depends on nature of business,Suppose retails industry giving importance to operating section than other, Otherwise Real Estate Company investing Section.But these two industry giving second preference to Financing Section
All of the them are the indicators of different levels, Operations, Investment & the ability to sustain itself, Levels may differ depending on the business cycle & the stage, Financing may show heavier pluses in the start up and operations could show negative along with investing, while once the business reaches its maturity stage (cash cow) the investing & financing may show little ins and higher outs (specially in financing), Matter of the stage the business in
