Cash flows financial accounting operating activities

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: sh Flows Direct Direct approach to approach to preparing preparing operating operating cash flows. cash flows. Financial Accounting Operating activities Cash received: Customers Interest and div idends on investments Cash paid: S uppliers Employees Interest on debt obligations Income taxes Cash Flows from Operating Activities Investing Activities Purchase of property, plant or equipment Purchase of other long-term assets S of property, plant or equipment ale S of other long-term assets ale Cash Flows from Investing Activities Financing Activities Issuance of long-term debt Issuance of contributed capital Dividends paid Repurchase of long-term debt Repurchase of contributed capital Cash Flows from Financing Activities Net increase or (decrease) in cash Beginning balance in cash account Ending balance in cash account Effect on Cash Flows + + Total + + Total + + Total LO 6 3-34 Total Asset Turnover Ratio Total Asset Turnover Ratio = Sales (or Operating) Revenues Average Total Assets (Beginning total assets + ending total assets) ÷ 2 Nestlé's Total Asset Turnover Ratio for 2009 (dollars in millions): $107,618 ($106,215 + $110,915) ÷ 2 This ratio measures the sales generated per dollar of assets. Financial Accounting = 0.99 Creditors and analysts use this ratio to assess a company’s effectiveness at controlling current and noncurrent assets. LO 6 3-35 Return on Assets (ROA) Ratio Return on Assets (ROA) Ratio = Profit* + Interest Expense (net of tax) Average Total Assets (Beginning total assets + ending total assets) ÷ 2 ROA measures how much the firm earned for each dollar of investment. This ratio answers the question “How well has management use the total invested capital provided by debtholders and shareholders during the period?” In complex calculations, interest expense (net of tax) and minority interest are added back to profit. * Financial Accounting LO 6 3-36 End of Chapter 3 Financial Accounting...
View Full Document

This note was uploaded on 04/02/2012 for the course AFM 101 taught by Professor Kennedy during the Winter '08 term at Waterloo.

Ask a homework question - tutors are online