cash receipts and cash disbursements as a result of business activity
direct method
approach used to determine net cash flows from operating activities, whereby accrual basis revenue and expenses are converted to cash basis collections and payments
financing activity
cash business transaction reported on the statement of cash flows that obtains or retires financing
free cash flow
operating cash, reduced by expected capital expenditures and by cash dividends payments
free cash flow to assets ratio
ratio of free cash flow to total assets
free cash flow to sales ratio
ratio of free cash flow to sales revenue
indirect method
approach used to determine net cash flows from operating activities, starting with net income and adjusting for items that impact new income but do not require outlay of cash
investing activity
cash business transaction reported on the statement of cash flows from the acquisition or disposal of a long-term asset
net cash flow
method used to determine profitability by measuring the difference between an entity’s cash inflows and cash outflows
noncash expense
expense that reduces net income but is not associated with a cash flow; most common example is depreciation expense
operating activity
cash business transaction reported on the statement of cash flows that relates to ongoing day-to-day operations
statement of cash flows
financial statement listing the cash inflows and cash outflows for the business for a period of time