In interpreting a statement of cash flows, the first thing a manager should examine is the company's ability to generate cash from operations.

Question

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The statement of cash flows is divided into three sections: cash flows from operations, cash flows from investing activities, and cash flows from financing activities. The cash flows from operations section shows the amount of cash a company generates from its core business operations. This section is considered the most important, as it indicates the company's ability to generate cash on a recurring basis. Therefore, a manager should examine this section first to understand the company's cash-generating ability.

In Interpreting a Statement of Cash Flows, the First Thing