Accounting Ch 13
marketable securities
short-term investments--have a maturity of more than 90 days but are intended to be held only until cash is needed for current operations
free cash flow
the amount of cash that remains after deducting the funds a company must commit to continue operating at its planned level
cash generating efficiency
a company's ability to generate cash from its current or continuing operations
trading securities
a type of marketable security that a company buys and sells for making a profit in the near term as opposed to holding them indefinitely for investment purposes
direct method
converts each item on the income statement from the accrual basis to the cash basis.
indirect method
does not require the conversion of each item on the income statement. It lists only the items necessary to convert net income to cash flows from operations
cash
including both cash and cash equivalent
cash equivalents
investments that can be quickly converted to cash--have a maturity of 90 days or less when they are purchased, and they include money market accounts, commercial paper (short-term corporate notes), and US treasury bills (a company invests in these to earn interest on cash that would otherwise be temporarily idle)
financing activities
involve obtaining resources from stockholders and creditors. Cash inflows include the proceeds from stock issues and from short- and long-term borrowing, cash outflows include the repayment of loans (excluding interest) and payments to stockholders, including cash dividends
investing activities
involve the acquisition and sale of property, plant, and equipment and other long-term assets, including long-term investments--also involve the acquisition and sale of short-term marketable securities, other than trading securities, and the making and collecting of loans
operating activities
involve the cash inflows and outflows from activities that enter into the determination of net income--include cash receipts from the sale of goods and services and from the sale of trading securities
statement of cash flows
shows how a company's operating, investing, and financing activities have affected cash during a period. Explains the net increases or decreases during a period
cash flow to assets
the ratio of net cash flows from operating activities to average total assets
cash flow yield
the ratio of net cash flows from operating activities to net income
cash flow to sales
the ratio of net cash flows from operating activities to net sales
noncash investing and financing transactions
transactions that involve only long-term assets, long-term liabilities, or stockholders' equity.