AFM101 Chapter 5: AFM 101 - Ch. 5

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM101
• Professor: Donna Psutka

Document Summary

Cash flow statement explains how cash balance at beginning changed to the ending balance. Cash includes: cash, cash equivalents short term, highly liquid investment with an original maturity of less than 3 months. Readily convertible to known amounts of cash. So near maturity that there is little risk that their value will change if interest rates change. Ie treasury bills (short-term gov"t debt), money market funds, commercial paper (short-term notes payable issued to large corporations) Cash flows from operating activities (cash flows from operations) Cash inflows and outflows that directly relate to revenues and expenses reported on income statement. Not affected by accruals, deferrals, and allocations. 2 approaches for presenting operating activities: direct method reports activities as a gross receipts and gross payments. Net cash inflow (outflow) from operating activities: inflow-outflow: indirect method starts with profit and eliminates non-cash items to arrive net cash inflow/outflow.