Session:16 Statement of Cash Flows
Key Terms
Principles of Accounting, Volume 1: Financial Accounting | Leadership Development – Micro-Learning Session
Rice University 2020 | Michael Laverty, Colorado State University Global Chris Littel, North Carolina State University| https://openstax.org/details/books/principles-financial-accounting
- cash flow
- cash receipts and cash disbursements as a result of business activity
- direct method
- approach used to determine net cash flows from operating activities, whereby accrual basis revenue and expenses are converted to cash basis collections and payments
- financing activity
- cash business transaction reported on the statement of cash flows that obtains or retires financing
- free cash flow
- operating cash, reduced by expected capital expenditures and by cash dividends payments
- free cash flow to assets ratio
- ratio of free cash flow to total assets
- free cash flow to sales ratio
- ratio of free cash flow to sales revenue
- indirect method
- approach used to determine net cash flows from operating activities, starting with net income and adjusting for items that impact new income but do not require outlay of cash
- investing activity
- cash business transaction reported on the statement of cash flows from the acquisition or disposal of a long-term asset
- net cash flow
- method used to determine profitability by measuring the difference between an entity’s cash inflows and cash outflows
- noncash expense
- expense that reduces net income but is not associated with a cash flow; most common example is depreciation expense
- operating activity
- cash business transaction reported on the statement of cash flows that relates to ongoing day-to-day operations
- statement of cash flows
- financial statement listing the cash inflows and cash outflows for the business for a period of time