CASH FLOW CLASSIFICATION + FINANCIAL RATIOS

• Issuance of common stock

• Redemption of bonds

FINANCING

Purchase of land & building

INVESTING

Sale of equipment

INVESTING

• Depreciation of machinery

• Amortization of patent

OPERATING (ADD TO NET INCOME)

Issuance of bonds for plant assets

SIGNIFICANT NONCASH ACTIVITY

• Payment of cash dividends

• Purchase of treasury stock

FINANCING

Exchange of furniture for office equipment

SIGNIFICANT NONCASH ACTIVITY

• Loss on sale of equipment

• Decrease in accounts payable during the year

OPERATING (ADD TO NET INCOME)

Increase in accounts receivable during the year

OPERATING (DEDUCT FROM NET INCOME)

Differences between annuity due and ordinary annuity

• ANNUITY DUE: PAYMENT MADE AT THE BEGINNING OF THE YEAR

• ORDINARY ANNUITY: PAYMENT AT THE END OF THE YEAR, MONTH, OR QUARTER

Current Cash Debt Coverage

NET CASH PROVIDED BY OPERATING ACTIVITIES➗AVERAGE CURRENT LIABILITIES

Cash Debt Coverage

NET CASH PROVIDED BY OPERATING ACTIVITIES➗AVERAGE TOTAL LIABILITIES

Free Cash Flow

NET CASH PROVIDED BY OPERATING ACTIVITIES ➖ CAPITAL EXPENDITURES ➖CASH DIVIDENDS

Liquidity Ratios

Measures of the company's short-term ability to pay its maturing obligations.

Activity Ratios

Measures of how effectively the company uses its assets.

Profitability Ratios

Measures of the degree of success or failure of a given company or division for a given period of time.

Coverage Ratios

Measures of the degree of protection for long-term creditors and investors.

Operating activities

Involve the cash effects of transactions that enter into the determination of net income

Investing activities

Include making and collecting loans and acquiring and disposing of investments, and property, plant, and equipment.

Financing activities

Involve liability and owners’ equity items.