BU127 Lecture Notes - Lecture 21: Cash Flow, Ceteris Paribus, Current Liability
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BU127 Full Course Notes
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Positive cash flows permit a company to: pay dividends to its owners, take advantage of opportunities in the market o expand its operations, replace needed assets. Financial analysts consider cash flow an important indicator of a company"s financial health. Cash: currency and cash equivalents: currency: paper money, deposits, etc. o cash equivalents: Near maturity that market value is unaffected by interest rate changes (original maturities of less than 3 months) Operating activities: cash inflows and outflows directly related to earnings from normal operations. Investing activities: cash inflows and outflows relations to the acquisition or sale of productive facilities and investments in the securities of other companies. Financing activities: cash inflows and outflows related to external sources of financing (owners and creditors) for the enterprise cash inflows -> business -> cash outflows. Direct method: reports components of cash flows from operating activities as gross receipts and gross payments, reports the cash effect of every operating activity.
