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
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
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
includes cash receipts and cash payments for transactions relating to revenue and expense activities
statement of cash flows
a summary of cash inflows and cash outflows during the reporting period sorted by operating, investing, and financing activities
the purchase of a long-term asset is classified in the statement of cash flows as an
investing activity
the issuance of common stock is classified in the statement of cash flows as a
financing activity
the payment of bonds payable is classified in the statement of cash flows as a
financing activity
Purchase of land by issuing common stock - cash or non cash activity?
noncash
we can identify operating activities from income statement information and changes in:
current asset and current liability accounts
the indirect and direct methods
are two allowable methods to present operating activities in the statement of cash flows
an example of a cash inflow from an investing activity is the receipt of
cash from the sale of equipment
an example of a cash outflow from a financing activity is
the payment of cash dividends
we can separate cash return on assets into
cash flow to sales and asset turnover