Separate disclosure of cash flow arising from Financial Activities is important because:

It is useful in predicting claims on future cash flow by providers of funds to the enterprise

The correct answer is option 4- It is useful in predicting claims on future cash flow by providers of funds to the enterprise.

The distinct presentation of cash flows related to financing activities holds significance because It is useful in predicting claims on future cash flow by providers of funds to the enterprise.

The financing activities relate to long-term funds or capital of an enterprise, e.g., cash proceeds from issue of equity shares, debentures, raising long-term bank loans, repayment of bank loan, etc. As per AS-3, financing activities are activities that result in changes in the size and composition of the owners’ capital (including preference share capital in case of a company) and borrowings of the enterprise. Separate disclosure of cash flows arising from financing activities is important because it is useful in predicting claims on future cash flows by providers of funds (both capital and borrowings) to the enterprise.