Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
35 Cards in this Set
- Front
- Back
Primary Purpose of Operating Activities
|
Source of Cash
|
|
Primary Purpose of Investing Activites
|
Use of Cash (Buy PP&E, other Investments)
|
|
Primary Purpose of Financing Activities
|
Source of Cash (Borrow Money, Sell stock)
|
|
Inflow
|
Cash going in- does not have brackets
|
|
Outflow
|
Cash going out- has brackets
|
|
SCF- importantance (5 points)
|
1. Capacity to meet obligations for cash.
2. Ability to generate cash flow in the future. 3. Effectiveness in implementing investing & financing strategies. 4. Success in productively managing investing activites 5. Future external financing needs |
|
SCF Facts
|
Period of time
Usually 3 years of data All are Operating, Financing or Investing activities. |
|
Indirect SCF
|
Reconciles net income on an accrual basis with cash flow from operating activites on a cash basis.
|
|
Difference between Indirect or direct format
|
Operating Section
|
|
SCF Operating Section
|
1. begins with Net Income/Loss
2. Analysis of the INcome Statement non cash expenses 3. Analysis of the balance sheet, current assets and current liabilities |
|
Investing Activities
|
Analysis of long-term assets
Buying and Selling |
|
External Financing
|
Anaysis of long-term liabilities & stockholders' equity
Debt and equity transactions |
|
Positive cash flows from operating activities
|
Indicative of mature industry
Net income is most likely positive |
|
Positive Cash flows from investing activities
|
Assets are being sold
ay not be much opportunity for growth/expansion operations being downsized asset GR negative |
|
Negative cash flows from financing activities
|
Creditors and/or owner are being paid off
|
|
Primary Purpose of Operating Activities
|
Source of Cash
|
|
Primary Purpose of Investing Activites
|
Use of Cash (Buy PP&E, other Investments)
|
|
Primary Purpose of Financing Activities
|
Source of Cash (Borrow Money, Sell stock)
|
|
Inflow
|
Cash going in- does not have brackets
|
|
Outflow
|
Cash going out- has brackets
|
|
SCF- importantance (5 points)
|
1. Capacity to meet obligations for cash.
2. Ability to generate cash flow in the future. 3. Effectiveness in implementing investing & financing strategies. 4. Success in productively managing investing activites 5. Future external financing needs |
|
SCF Facts
|
Period of time
Usually 3 years of data All are Operating, Financing or Investing activities. |
|
Indirect SCF
|
Reconciles net income on an accrual basis with cash flow from operating activites on a cash basis.
|
|
Difference between Indirect or direct format
|
Operating Section
|
|
SCF Operating Section
|
1. begins with Net Income/Loss
2. Analysis of the INcome Statement non cash expenses 3. Analysis of the balance sheet, current assets and current liabilities |
|
Investing Activities
|
Analysis of long-term assets
Buying and Selling |
|
External Financing
|
Anaysis of long-term liabilities & stockholders' equity
Debt and equity transactions |
|
Positive cash flows from operating activities
|
Indicative of mature industry
Net income is most likely positive |
|
Positive Cash flows from investing activities
|
Assets are being sold
ay not be much opportunity for growth/expansion operations being downsized asset GR negative |
|
Negative cash flows from financing activities
|
Creditors and/or owner are being paid off
|
|
Asset increase
Asset decrease Liability Increase Liability decrease |
Cash flow decrease (brackets)
Cash flow increase Cash flow increase Cash flow decrease |
|
What do you want Cash flow patterns to look like
|
Operating Cash FLows Positive
Investing Cash Flows Negative Financing Cash Flows Negative Company is prosperous and mature, growing by investing in long-term assets, using financing to take advantage of opportunties. |
|
Cash inflow
|
Asset Decrease
Liability Increase S/E Increase |
|
Cash Outflow
|
Asset Increase
Liability Decrease S/E Decrease |
|
2 Rules of Cash Flow
|
Large operating cash flow relative to N/I usually indicates good financial performance
Cash flow from operating activities normally is ppproximately = to cash from from investing activities + cash flow from financing activities |