*3.1. The Companies' Balance Sheet: Financial Statement and Cash Flows*

The accounting of companies serves to measure exchanges and the relationship with the external environment in monetary and economic terms: The balance sheet represents the summary document.

Information on the accounts has fiscal purposes, but it also serves to assess the company's "state of health" and its activities, reporting any unstable situations.

The Civil Code regulates the accounting report; in particular, the Art. 2423—Drafting the financial statements provides that the managers, annually, must prepare the financial statements, consisting of the balance sheet (art. 2424), the income statement (art. 2425), the cash flow statement and the explanatory note (art. 2427) [15]

The income and the expenses shown in the Cash Flow Statement represent the cash flows actually recorded in the year for the different categories of business of the company. For these reasons, the cash flow report is an analysis of cash flows [16].

We consider cash flows since the economic balance, given by revenues = costs, cannot be achieved daily: While some costs and revenues have a fairly uniform distribution over time, others occur at unpredictable intervals; indeed, some expenses. The flows can be:


### 3.1.1. Operational Activity

Cash flows from operating activities generally comprise the flows coming from the acquisition, the production and the distribution of goods and from the supply services, even if referable to ancillary operations, and the other flows not included in the investment and financing activities.

Some examples of cash flows generated or absorbed by operating activities are:

