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ACCT 202: Exam 1
Purpose of Statement of Cash Flows
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-increase/decrease in cash during period
-how cash is generated/used
-helps external users evaluate cash generation
-helps managers determine if sufficient cash funds are available
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Cash generally includes:
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cash on hand and petty cash
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cash equivalents include:
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highly liquid assets such as money market accounts and US Treasury Bills and certificates of deposits with a 3 month or less maturity date
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Operating
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day to day profit-making activities
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Investing
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Buying and selling long term assets
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Financing
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generate capital or paying it back (debt and equity)
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Operating activities affect what?
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Net Income
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Investing is.. (not the definition)
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-buying and selling property, plant, and equipment
-buying and selling long-term investments
-long-term notes receivables
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Financing is...
(not the definition)
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-borrowing/paying back stock
-issuing stock
-paying dividends
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Indirect Method
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starts with net income and adjusts cash from operations
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Direct method
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Lists many of the same items as on the income statement, but on a cash rather than accrual basis
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Trend Analysis
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The direction a business is taking over a long period of time
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Trend % Formula
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Any year $ / Base year $ *100
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Horizontal Analysis is used for which financial statements?
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All
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Vertical Analysis is used for which statements?
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Income Statement and Balance Sheet
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Net Sales on Income Statement
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Each item on income statement / Net sales
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Total Assets on Balance Sheet
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Each balance sheet item / Total Assets
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Current Ratio
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Current Assets / Current Liabilities
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Working Capital
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Current Assets - Current Liabilities
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Debt Ratio
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Total Liabilities / Total Assets
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Return on Sales
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Net Income / Net Sales
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3 Activities in Order
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Operating, Financing, Investing
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