Financial Accounting Vocabulary - Chapter 11: Statement of Cash Flows

Operating Activities

Includes cash receipts and cash payments for transactions relating to revenue and expense activities.

Investing Activities

Includes cash transactions involving the purchase and sale of long-term assets and current investments.

Financing Activities

Includes cash transactions resulting from the external financing of a business

Statement of Cash Flows

A summary of cash inflows and cash outflows during the reporting period sorted by operating, investing, and financing activities.

Direct Method

Adjusts the items on the income statement to directly show the cash inflows and outflows from operations, such as cash received from customers and cash paid for inventory, salaries, rent, interest, and taxes.

Indirect Method

Begins with net income and then lists adjustments to net income in order to arrive at operating cash flows.

Operating

Interest paid on bonds, purchase of supplies, and payments on account are cash outflows from _________ activities

Cash return on Assets

Net cash flows from operating activities divided by average total assets; measures the operating cash flow generated per dollar of assets

Cash flow to sales

Net cash flows from operating activities divided by sales revenue; measure the operating cash flow generated per dollar of sales.

Investing

Purchase of long-term investments, purchase of land, or a purchase of buildings and equipment are cash outflows from _________ activities.

Financing

Repaying borrowed money from a bank and paying dividends are cash outflows from _________ activities.

Asset Turnover

Sales revenue divided by average total assets; measures the sales revenue generated per dollar of assets

Noncash Activities

Significant investing and financing activities that do not affect cash.