Chapter 13 Flashcards
3 Sections of Cash Flows
OPERATING - income
INVESTING - long term asset
FINANCING - long-term liabilities and stockholders equity
Indirect Method
Less costly to prepare
Beginning with Net Income
Then adjust revenues and expenses that do-not involve cash
Such as
sale on account
Purchases on account
Depreciation
Amortization
Net Cash Used
Cash flow from operations is
negative
Net Cash Provided
Cash flow from operations is positive
When preparing the “Statment of Cash Flows” and assessing the CHANGES in the current operating activities
Ask yourself?
Does it effect the cash
Inflow
or
Outflow
Bond holders & long-term creditors are most interested in the _____ of a company’s análisis
Solvency
A company’s ability to generate earnings is called?
Profitability
On a common income statement what is given a s a percentage?
Sales
Which analytical method are no dollars amounts shown?
Common sized statement
Formula use to compute “inventory turnover”
Cost of goods sold / Average inventory
If a company “times interest earned ratio” is over 12 it has?
Enough earning to make interest payments
3 Solvency Ratios
Times interest earned
Fixed assets /long term liabilities
Liabilities / stockholders equity
A company tat is leveraged has
Debit Financing,
Trying to increase ROi
Formula for finding earnings per share on common stock
Net income - preferred dividends / outstanding #shares of common stock
Direct Method
of Cash Flows
Difference between operating cash receipts and operating cash payments
