BUSI 2150U Chapter Notes - Chapter 5: Cash Flow Statement, Cash Cash, Cash Flow
Document Summary
Chapter 5 cash flow, profitability and the cash flow statement. If an entity is short of cash, suppliers may stop supplying and employees may stop working. It"s cash, not income or revenue, that pays the bills. An entity usually has to spend money before collecting cash from customers. Almost always a lag between the expenditure of cash and the receipt of cash. Cash cycle is the cycle by which an entity begins with cash, invests in resources, provides goods or services to customers using those resources, and then collects cash from customers. The cash cycle shows all investment, including capital assets, needed to operate a business. Cash lag is the delay between the expenditure of cash and the receipt of cash. Inventory conversion period is the average length of time between receiving inventory from a supplier and selling it to a customer.
