BU127 Chapter Notes - Chapter 5: Cash Flow Statement, Cash Flow, Decision Table

• School: WLU
• Department: Business
• Course: BU127
• Professor: All

Document Summary

Positive cash flow allows company to: pay dividends to owners, expand its operations, take advantage of market opportunities, replace needed assets. Financial analysts consider cash flo(cid:449) a(cid:374) i(cid:373)porta(cid:374)t i(cid:374)di(cid:272)ator of (cid:272)o(cid:373)pa(cid:374)y"s fi(cid:374)a(cid:374)(cid:272)ial health. Statement of cash flows fo(cid:272)uses atte(cid:374)tio(cid:374) o(cid:374) fir(cid:373)"s a(cid:271)ility to ge(cid:374)erate (cid:272)ash i(cid:374)ter(cid:374)ally, (cid:373)gt of (cid:272)urre(cid:374)t assets a(cid:374)d lia(cid:271)ilities and details of investments and external financing. Statement of cash flows explains how cash balance at the beg of the period changed to another cash balance at the end of the period. Short term, highly liquid investments: readily convertible into cash. So near maturity that market value is unaffected by interest rate changes (i. e. original maturities of less than 3 months) Cash inflows and outflows directly related to earnings from normal operations. Direct method: method of presenting the operating activities section of the statement of cash flows reports the components of cash flows from operating activities as gross receipts and gross payments.