Accounting Chapter 13
Terms
undefined, object
copy deck
- Cash Equivalent
- a short-ter, highly liquid investment with an original maturity of less than three months
- Cash Flows from Operating Activities (Cash flows from Operations)
-
cash inflows and outflows directly related to earnings from normal operations
-
Direct Method (of presenting the Operating Activities Section of the Cash Flow Statement)
-
reports components of cash flows from operating activities as gross receipts and gross payments
- Indirect Method (of presenting the Operating Activities Section of the Cash Flow Statement)
-
adjusts net income to compute cash flows from operating activities
-
Cash Flows from Investing Activities
- cash inflows and outflows related to the acquisition or sale of productive facilities and investments in the securities of other companies
- Cash Flows from Financing Activities
-
cash inflows and outflows related to external sources of financing (owners and creditors) for the enterprise
-
Free Cash Flow =
-
Free Cash Flow = Cash Flow from Operating Activities - Dividends - Capital Expenditures
- Non-cash Investing and Financing Activities
- transactions that do not have direct cash flow effects; they are reported as a supplement to the statement of cash flows in narrative or schedule form
-
Quality of Income Ratio =
-
Quality of Income Ratio = Cash Flow from Operating Activities / Net Income
Indicates what portion of income was generated in cash
-
Capital Acquisitions Ratio =
-
Capital Acquisitions Ratio = Cash Flow from Operating Activities / Cash Paid for Property, Plant, and Equipment
Measures the ability to finance purchases of pant and equipment from operations