BalanceSheetandStatementofCashFlows幻灯片.pptVIP

High amount - company able to generate sufficient cash to pay its bills. Low amount - company may have to borrow or issue equity securities to pay bills. Usefulness of the Statement of Cash Flows Without cash, a company will not survive. Cash flow from Operations: LO 7 Understand the usefulness of the statement of cash flows. Usefulness of the Statement of Cash Flows Ratio indicates whether the company can pay off its current liabilities from its operations. A ratio near 1:1 is good. LO 7 Understand the usefulness of the statement of cash flows. Financial Liquidity Net Cash Provided by Operating Activities Average Current Liabilities Current Cash Debt Coverage Ratio = Usefulness of the Statement of Cash Flows This ratio indicates a company’s ability to repay its liabilities from net cash provided by operating activities, without having to liquidate the assets employed in its operations. LO 7 Understand the usefulness of the statement of cash flows. Net Cash Provided by Operating Activities Average Total Liabilities Cash Debt Coverage Ratio = Financial Liquidity Usefulness of the Statement of Cash Flows The amount of discretionary cash flow a company has for purchasing additional investments, retiring its debt, purchasing treasury stock, or simply adding to its liquidity. LO 7 Understand the usefulness of the statement of cash flows. Illustration 5-28 Free Cash Flow Review The current cash debt coverage ratio is often used to assess a. financial flexibility. b. liquidity. c. profitability. d. solvency. LO 7 Understand the usefulness of the statement of cash flows. Usefulness of the Statement of Cash Flows Supplemental Disclosures Four types of information that are supplemental to account titles and amounts presented in the balance sheet: LO 8 Determine which balance sheet information requires supplemental disclosure. Parenthetical Explanations Notes Cross-Reference and Contra Items Supporting Schedules Terminology Techniques of