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Evaluate liquidity/ solvency of business & generate cash internally. *cash equivalent- investment high liquid & 3 months. Convertible to known cash amount, mkt value not affected by interest. (t-bills, bonds car is not) *operating activity- principle revenue producing activities of enterprise. (buy computer to sell) ~inflows- customer receipts of cash dividends, interest received from borrowers. ~outflows- salary, payment to suppliers, taxes/fines, interest paid to lenders. *investing activity- disposal of long-term assets & other investments not classified as cash equivalent. (buy computer to use) ~inflows- sell long-term assets (used furniture) & equity investment, collect loans. ~outflows- purchase long-term assets (property), sales & payment to debt securities. *financing activity- transactions w/ business owners & creditors to borrow/repay amount. ~inflows- issuing equity security, bonds, notes, temporary & long-term liability. ~outflow- pay dividend to holder, purchase treasury shares, loans, owner withdraw. 1-retirement of debt by issuing equity security (pay back debt by shares)

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