Looks like no one added any tags here yet for you.
What are Operating Activities?
cash receipts and cash payments for transactions relating to revenue and expense activities
What are Investing Activities?
cash transactions involving the purchase and sale of long-term assets and current investments
What are Financing Activities?
inflows and outflows of cash resulting from the external financing of a business (transactions with lenders and with stockholders)
What are some examples of operating cash inflows?
Sale of goods/services
Collection of interest/dividend
What are some examples of operating cash outflows?
Purchase of inventory
Payment for operating expenses
Payment of interest
Payment of income taxes
What are some examples of investing cash inflows?
Sale of investments
Sale of long-term assets
Collection of notes-receivable
Sale of subsidiary
What are some examples of investing cash outflows?
Purchase of investments
Purchase of long-term assets (CAPEX)
Lending w/ notes receivable
Cash acquisition of another company
What are some examples of financing cash inflows?
Issuance of bonds or notes payable
Issuance of stock
What are some examples of financing cash outflows?
Repayment of bonds or notes payable
Payments to repurchase stock (treasury stock)
Payment of dividends
Where do you source the information to build the statement of cash flows?
Income Statement, Balance Sheet, Detailed Accounting Record
What is the Direct Method for preparing the statement of cash flows?
Uses actual cash in/outflows from operations
More intuitive
Time consuming
What is the Indirect Method for preparing the statement of cash flows?
Requires converting accrual basis accounting to cash basis by preparing a list of āadjustments to net incomeā
Most popular method
Easier and less costly
What is the difference when dealing with the cash flow from operations?
only difference is the method used, but both methods give the same result
What are the steps to preparing the statement of cash flows?
Net cash flows from operating activities
Net cash flows from investing activities
Net cash flows from financing activities
Sum all activities to verify it equals change in cash in balance sheet
When you use the indirect method, you start with net income and then adjust this number for what?
Income Statement Items (noncash revenues/expenses & nonoperating gains/losses)
Balance Sheet Items (changes in current assets and current liabilities)
What are the income statement adjustments to net income based on the cash flows from operating activities?
+ Depreciation Expense
+ Amortization Expense
+ Stock-based Compensation Expense
+ Loss on sale of assets
- Gain on sale of assets
What are the balance sheet adjustments to net income based on the cash flows from operating activities?
- Increase in a current asset
+ Decrease in a current asset
+ Increase in a current liability
- Decrease in a current liability
What is the pattern in the statement of cash flows for Operating Cash Flows by life cycle?
Startup: -
Growth: +
Strady State: +
Decline: -
What is the pattern in the statement of cash flows for Investing Cash Flows by life cycle?
Startup: -
Growth: -
Strady State: -
Decline: +
What is the pattern in the statement of cash flows for Financing Cash Flows by life cycle?
Startup: +
Growth: +
Strady State: -
Decline: + / -
What is the Cash Return on Assets Ratio?
Measures the operating cash flow generated per dollar of assets
What is the formula for the Cash Return on Assets Ratio?
Operating Cash Flows / Average Total Assets
What is the Cash Flow to Sales Ratio?
Measures the operating cash flows generated for each dollar of sales
What is the formula for the Cash Flow to Sales Ratio?
Operating Cash Flows / Net Sales
What is the Asset Turnover Ratio?
Measures the sales revenue generated per dollar of assets
What is the formula for the Asset Turnover Ratio?
Net Sales / Average Total Assets