Operating cash flows generally involve income statement items (which are reflected in Retained Earnings) and balance sheet items (such as changes in current assets and current liabilities).

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Operating cash flows are derived from income statement items (such as revenue, expenses, and depreciation) as well as changes in current assets (such as accounts receivable, inventory, and prepaid expenses) and current liabilities (such as accounts payable, accrued expenses, and taxes payable).

Operating Cash Flows Generally Involve Income Statement Items (Which Are