Statement of Cash Flows - Vocabulary Flashcards

A set of vocabulary flashcards covering key terms related to the cash flow statement and its components.

Statement of Cash Flows

A financial statement that reports actual cash inflows and outflows during a period and explains how cash relates to net income and the balance sheet.

Operating Activities

Cash flows from day-to-day business operations, including revenue, expenses, accounts receivable/payable, and changes in working capital.

Investing Activities

Cash flows related to long-term assets and investments, such as purchase or sale of property, plant, equipment, and securities.

Financing Activities

Cash flows related to obtaining and repaying capital, including issuing debt or equity, loan repayments, dividends, and stock buybacks.

Indirect Method

A method to calculate cash flow from operations by starting with net profit and adjusting for non-cash items and changes in working capital.

Net Profit / Net Income

Profit after expenses on the income statement; not equal to cash flow due to non-cash items and timing differences.

Non-Cash Expenses

Expenses that reduce net income but do not involve cash, such as depreciation, amortization, and adjustments for doubtful accounts.

Depreciation

Allocation of the cost of tangible fixed assets over their useful life; a non-cash expense.

Amortization

Allocation of the cost of intangible assets or loan fees over time; a non-cash expense.

Working Capital

Current assets minus current liabilities; changes affect cash flow in operating activities.

Accounts Receivable (AR)

Money owed by customers; an asset; an increase ties up cash and reduces cash flow.

Accounts Payable (AP)

Money owed to suppliers; a liability; an increase provides cash relief in operating activities.

Inventory

Goods held for sale; an increase consumes cash, a decrease frees cash; part of working capital.

Salaries Payable

Accrued salaries; a current liability affecting cash when paid.

Cash Inflows (Operating)

Cash receipts from operating activities such as revenue, interest, and dividends.

Cash Outflows (Operating)

Cash payments for operating activities such as wages, rent, utilities, and taxes.

Net Cash Provided by Operating Activities

The net amount of cash generated or used by core operating activities after adjustments.

Net Cash Provided by Investing Activities

Net cash used for or received from investing activities (long-term assets and investments).

Net Cash Provided by Financing Activities

Net cash from financing activities, including debt and equity changes.

Non-Cash Transactions

Items that affect financial statements but do not involve cash (e.g., depreciation, amortization, gains/losses).

Beginning Cash / Ending Cash

Opening and closing cash balances for the period shown on the cash flow statement.

Direct Method

A cash flow method listing actual cash receipts and payments, rather than starting from net income.

Indirect Method Adjustments

Adjustments made in the indirect method, including adding back non-cash expenses and changes in working capital.

Gains and Losses

Non-operating effects that affect net income but may not involve cash; adjustments are needed in the cash flow calculation.

Doubtful Accounts (Allowance)

Estimate of uncollectible receivables; a non-cash adjustment to net income.

Dividends

Cash paid to shareholders; a financing activity outflow.

Stock Buybacks

A financing outflow where a company repurchases its own shares.

Proceeds from Loans

Cash inflows from borrowing; part of financing activities.

Proceeds from Sale of Assets

Cash inflows from selling long-term assets; part of investing activities.

Net Increase/Decrease in Cash

Overall change in the cash balance for the period after considering operating, investing, and financing activities.

Beginning Cash

Cash balance at the start of the period.

Ending Cash

Cash balance at the end of the period.