Chapter 11 - Statement of Cash Flows

This set of flashcards covers key terms and definitions related to the Statement of Cash Flows from Chapter 11, helping to reinforce understanding and aid in exam preparation.

Statement of Cash Flows

A financial report that shows how cash flows in and out of a business over a certain period, categorized into operating, investing, and financing activities.

Noncash Activities

Investing and financing activities that do not involve direct cash transactions, like purchasing assets through debt or stock issuance.

Operating Activities

Cash flows related to the core business operations, including cash receipts from sales and cash payments for expenses.

Investing Activities

Cash flows that result from purchasing or selling long-term assets, like property, plant, and equipment.

Financing Activities

Cash flows related to borrowing and repaying debts, issuing stocks, and paying dividends.

Direct Method

A method for calculating cash flows from operating activities which shows actual cash receipts and payments.

Indirect Method

A method that starts with net income and adjusts for noncash transactions and changes in working capital to determine cash flows from operating activities.

Depreciation Expense

A noncash charge that reduces net income on the income statement but does not affect cash flow.

Cash Inflows

Money coming into the business, such as cash sales or cash received from customers.

Cash Outflows

Money going out of the business, such as cash paid for expenses, purchases, or investing.

Net Cash Flow

The difference between cash inflows and outflows during a period; indicates whether the cash balance has increased or decreased.

Adjustments to Net Income

Corrective changes made to the net income to reflect actual cash flow position, including adding back noncash expenses like depreciation or subtracting gains.

Cash Flow Ratios

Financial metrics used to evaluate a company's cash generation ability, providing insight into liquidity and operational efficiency.

Gains and Losses on Sale of Assets

The profit or loss recognized when a long-term asset is sold; gains are subtracted from net income in cash flow calculations, while losses are added.

Accounts Receivable

Money owed by customers for goods or services delivered but not yet paid for, affecting cash flow.

Accounts Payable

Money the business owes to suppliers or creditors, impacting cash flow based on payment timing.

Treasury Stock

Shares that were issued but later repurchased by the company, representing a cash outflow when purchased.

Dividend Payments

Cash distributed to shareholders from the company's earnings, affecting financing activities.

Return on Assets

A profitability ratio that shows how effectively a company uses its assets to generate earnings.

Cash Return on Assets

A metric that measures the cash generated from operations per unit of assets, providing insights into cash efficiency.