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Principles of Financial Accounting
Chapter 15
14
Accounting
Undergraduate 2
05/28/2011

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Term
Cash
Definition
For purposes of the statement of cash flows, both cash and cash equivalents.
Term
Cash equivalents
Definition
Short-term (90 days or less), highly liquid investments, including money market accounts, commercial paper, and U.S. Treasury bills.
Term
Cash-generating efficiency
Definition
A company's ability to generate cash from its current or continuing operations.
Term
Direct method
Definition
The procedure for converting the income statement from an accrual basis to a cash basis by adjusting each item on the income statement.
Term
Financing activities
Definition
Business activities that involve obtaining resources from stockholders and creditors and providing the former with a return on their investments and the latter with repayment.
Term
Free cash flows
Definition
The amount of cash that remains after deducting the funds a company must commit to continue operating at its planned level; Net Cash Flows from Operating Activites - Dividends - (Purchases of Plant Assets - Sales of Plant assets).
Term
Indirect Method
Definition
The procedure for converting the income statement from an accrual basis to a cash basis by adjusting net icome for items that do not affect cash flows, including depreciation, amortization, depletion, gains, losses, and changes in current assets and current liabilities.
Term
Investing Activities
Definition
Business activities that involve the acquisition and sale of marketable securities and long-term assets and the making and collecting of loans.
Term
Noncash investing and financing transactions
Definition
Significant investing and financing transactions involving only long-term assets, long-term liabilities, or stockholders' equity that do not affect current cash inflows or outflows.
Term
Operating activities
Definition
Business activities that involve the cash effects of transactions and other events that enter into the determination of net income.
Term
Statement of cash flows
Definition
A financial statement that shows how a company's operating, investing, and financing activities have affected cash during an accounting period.
Term
Cash flows to assets
Definition
Net Cash Flows from Operating Activities ÷ Average Total Assets
Term
Cash flows to sales
Definition
Net Cash Flows from Operating Activities ÷ Sales
Term
Cash flow yield
Definition
Net Cash Flows from Operating Activities ÷ Net Income
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