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10 Cards in this Set
- Front
- Back
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Cash Equivalents
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Short-term, highly liquid investments such as Treasury bills commercial paper, and money market funds that are made solely for the purpose of generating a return on temporarily idle funds. (p. 689)
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Direct Method
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A method of computing the net cash provided by operating activities in which the income statement is reconstructed on a cash basis from top to bottom. (p 697)
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Financing Activities
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All transactions (other than interest payments) inolving borrowing from creditors or repaying creditors as well as transactions with the company's owners. (p 695)
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Free cash flow
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Measures a company's ability to fund its capital expenditures and dividends from its net cash provided by operating activities. (p. 704)
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Indirect method
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A method of computing the net cash provided by operating activities that starts with net income and adjusts it to a cash basis. It is also known as the reconciliation method (p. 697)
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Investing Activities
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Transactions that involve acquiring or disposing of noncurrent assets. (p. 695)
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Net cash provided by operating activities
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The net result of the cash inflows and outflows arising from day-to-day operations. (p.696)
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Operating activities
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Generally speaking, activities that affect current assets, current liabilities, or net income. (p. 695)
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Reconciliation method
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See indirect method. (p. 697)
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Statement of cash flows
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A financial statement that highlights the major activities that directly and indirectly impact cash flows and hence affect the overall cash balance. (p. 688)
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