Chapter 12
Cash debt coverage ratio A cash-basis ratio used to evaluate solvency, calculated as cash provided by operating activities divided by average total liabilities. (p. 000)
Current cash debt coverage ratio A cash-basis ratio used to evaluate liquidity, calculated as cash provided by operations divided by average current liabilities. (p. 000)
Direct method A method of determining net cash provided by operating activities by adjusting each item in the income statement from the accrual basis to the cash basis. (p. 000)
Financing activities Cash flow activities that include (a) obtaining cash from issuing debt and repaying the amounts borrowed and (b) obtaining cash from stockholders and providing them with a return on their investment. (p. 000)
Free cash flow Cash provided by operating activities adjusted for capital expenditures and dividends paid. (p. 000)
Indirect method A method of preparing a statement of cash flows in which net income is adjusted for items that do not affect cash, to determine net cash provided by operating activities. (p. 000)
Investing activities Cash flow activities that include (a) purchasing and disposing of investments and productive long-lived assets using cash and (b) lending money and collecting on those loans. (p. 000)
Operating activities Cash flow activities that include the cash effects of transactions that create revenues and expenses and thus enter into the determination of net income. (p. 000)
Product life cycle A series of phases in a product’s sales and cash flows over time; these phases, in order of occurrence, are introductory, growth, maturity, and decline. (p. 000)
Statement of cash flows A basic financial statement that provides information about the cash receipts and cash payments of an entity during a period, classified as operating, investing, and financing activities, in a format that reconciles the