Arrange the following categories of cash inflows and cash outflows in a correct order. 1. Cash flows from investing activities. 2. Cash flows from financing activities. 3. Cash flows from operating activities.

The correct answer is: A. 3, 1, 2

Cash flows from investing activities are cash flows that result from the acquisition and sale of long-term assets, such as property, plant, and equipment. Cash flows from financing activities are cash flows that result from changes in the company’s capital structure, such as borrowing money or issuing shares. Cash flows from operating activities are cash flows that result from the company’s day-to-day operations, such as selling goods or services.

Here is a brief explanation of each option:

• Option A: This is the correct answer. Cash flows from investing activities are the first category of cash flows to be reported on the statement of cash flows, followed by cash flows from financing activities and then cash flows from operating activities.
• Option B: This is incorrect. Cash flows from operating activities should be reported before cash flows from investing activities.
• Option C: This is incorrect. Cash flows from financing activities should be reported before cash flows from investing activities.
• Option D: This is incorrect. Cash flows from operating activities should be reported before cash flows from financing activities.