What are the three categories of cash flows in a firm?

The three categories of cash flows in a firm are indeed operating, investment, and financing flows. Each category serves a distinct purpose in the financial management of a business.

Operating cash flows refer to the cash generated or consumed from the primary revenue-generating activities of the business. This includes cash transactions related to sales and the day-to-day operations, such as payment to suppliers and salaries. The essence of operating cash flows is to provide insight into the core activities of the business that contribute to its profitability.

Investment cash flows concern the acquisition and disposal of long-term assets and investments. This category encompasses cash spent on purchasing property, plants, and equipment, as well as the cash received from selling these assets. Investment cash flows are crucial for understanding how effectively a company is investing in its long-term growth and infrastructure.

Financing cash flows involve transactions with the company's owners and creditors. This includes cash raised from issuing stocks or bonds and payments made to shareholders in the form of dividends, as well as repayments made on debts. The financing activities help assess how a firm finances its operations and growth through debt and equity.

When considering the other options, they don't accurately represent the primary categories recognized in finance. Operational, strategic, and financial flows focus more on broader business strategies rather