408 Ch 3

408 Ch 3 - Chapter 3 3.1 Cash flow and Financial...

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Chapter 3 3.1 Cash flow and Financial Statements: Activities that bring in cash are called  sources of cash Activities that involve spending cash are called  uses of cash.  Statement of Cash Flows  is a firms financial statement that summarizes its sources  and uses of cash over a specified period.  This groups all activities into: operating activities, financing activities, and investing  activities. 3.2 Standardized Financial Statements Common-size Statements These are a standardized financial statement presenting all items in % terms. Balance  sheet items are shown as a % of assets and income statement items as a % of sales.  3.3 Ratio Analysis financial ratios   are relationships determined from a firm’s financial information and  used for comparison purposes Short-term solvency, or liquidity, Measures This group is intended to provide information about a firm’s liquidity.  Current Ratio = Current Assets/ Current Liabilities This is the amount of assets per dollar of liabilities.  The higher the CR the better, this indicates high liquidity. But it may also indicate an  inefficient use of cash and other short-term assets.  Quick Ratio = Current Assets – Inventory / Current Liabilities
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This note was uploaded on 02/23/2012 for the course BUSI 408 taught by Professor Croce during the Spring '08 term at UNC.

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408 Ch 3 - Chapter 3 3.1 Cash flow and Financial...

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