Accounting 201Chapter 11 Key Words Flashcards
Asset turnover
Sales revenue divided by average total assets; measures the sales revenue generated per dollar of assets.
Cash flow to sales
Net cash flows from operating activities divided by sales revenue; measures the operating cash flow generated per dollar of sales.
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.
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.
Financing activities
Transactions involving external sources of funding. Includes cash transactions resulting from the external financing of a business.
Indirect method
Begins with net income and then lists adjustments to net income in order to arrive at operating cash flows.
Investing activities
Transactions involving the purchase and sale of (1) long-term resources such as land, buildings, equipment, and machinery and (2) any resources not directly related to a company’s normal operations.Includes cash transactions involving the purchase and sale of long-term assets and current investments.
Noncash activities
Significant investing and financing activities that do not affect cash.
Operating activities
Transactions involving the primary operations of the company, such as providing products and services to customers and the associated costs of doing so, like utilities, taxes, advertising, wages, rent, and maintenance. Includes cash receipts and cash payments for transactions relating to revenue and expense activities.
Statement of cash flows
A financial statement that measures activities involving cash receipts and cash payments over an interval of time. A summary of cash inflows and cash outflows during the reporting period sorted by operating, investing, and financing activities.
