ADMS 1500 Lecture Notes - Cash Flow Statement, Cash Flow, Net Income
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4 Jan 2013
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Inputs q x $ selling price x q our process: direct costs $ x q indirect costs: allocated . Running out of cash is a serious threat to the continuation of the business. Liquidity can be assessed through liquidity ratios such as the current ratio and the quick ratio. Liquidity can also be monitored through the statement of cash flows. Cash flow: protect against liquidity problems; need to have sufficient cash. The cash flow statement is a classified summary of cash transactions in the year showing how cash is received or spent in: Changes in debt and in shareholders" equity (other than operations) Even if you have a lost you still have a positive cash flow because profit is not the same thing as cash flow. Main reason: amortization expense but it"s not cash. Net income is not the same as cash flow big difference is amortization. Investing activities negative cash flow, amortization positive cash flow.
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FILL IN THE CORRECT TERMINOLOGIES IN THE BLANK SPACES | ||
_____ 1. | a. A method of internal (managerial accounting) reporting that emphasizes the distinction between variable and fixed costs. | |
_____ 2. | b. A discounted cash flow approach to capital budgeting that computes the present value of all future cash flows. | |
_____ 3. | c. Determination of the maximum cost a company can spend to make a product given a set volume, selling price and desired operating profit. | |
_____ 4. | d. An analysis of the additional costs and benefits of a proposed alternative compared with the current situation. | |
_____ 5. | e. A historical cost that the company has already incurred which is irrelevant to the decision making process. | |
_____ 6. | f. Costs that will not continue if an ongoing operation is changed or deleted. | |
_____ 7. | g. An already owned production site that is not currently in use. | |
_____ 8. | h. The maximum available benefit foregone by using a resource for a particular purpose. | |
_____ 9. | i. The predicted future costs and revenues that will differ among alternative courses of action. | |
_____ 10. | J. The time it will take to recoup, in the form of cash inflows from operations, the initial dollars invested in a project | |
_____ 11. | k. Those costs of facilities and services that are shared by users | |
_____ 12. | l. The juncture of manufacturing where separate products developed in the same process become individually identifiable. | |
_____ 13. | m. A costing approach that considers all indirect manufacturing costs (both variable and fixed) to be product (inventoriable) costs. | |
_____ 14. | n. Purchasing products or services from a supplier outside the company. | |
_____ 15. | o. Capital budgeting models that focus on cash inflows and ouflows while taking into account the time value of money | |
_____ 16. | p. Calculation of a selling price sufficient to cover the cost of producing a product as well as desired operating income | |
_____ 17 | q. The long-term planning for investment commitments with returns spread over multiple years | |
_____ 18. | r. A decision process that compares the differential revenues and costs of alternatives. | |
_____ 19. | s. Costs that will continue even if a company discontinues one of its current operations | |
_____ 20. | t. The increase in expected average annual operating income divided by the original required investment |