Chapter 12 Key Terms and Definitions

Question 1

What is cash flow on total assets?

Answer 1

Ratio of operating cash flows to average total assets; not sensitive to income recognition and measurement; partly reflects earnings quality.

Question 2

What is the direct method?

Answer 2

Presentation of net cash from operating activities for the statement of cash flows that lists major operating cash receipts less major operating cash payments.

Question 3

What are financing activities?

Answer 3

Transactions with owners and creditors that include obtaining cash from issuing debt, reapying amounts borrowed, and obtaining cash from or distributing cash to owners.

Question 4

What is the indirect method?

Answer 4

Presentation that reports net income and then adjusts it by adding and subtracting items to yield net cash from operating activities on the statement of cash flows.

Question 5

What are investing activities?

Answer 5

Transactions that involve purchasing and selling of long term assets, includes making and collecting notes recievable and investments in other than cash equivalents.

Question 6

What are operating activities?

Answer 6

Activities that involve the production or purchase of merchandise and the sale of goods or services to customers, including ependitures related to admininstering the business.

Question 7

What is the statement of cash flows?

Answer 7

A financial statement that lists cash inflows and cash outflows during a period; arranged by operating, investing, and financing.