AFM101 Chapter Notes - Chapter 5: Money Market Fund, Income Statement, Commercial Paper

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM101
• Professor: Donna Ptsuka

Document Summary

A cash equivalent is a short-term, highly liquid investment with an original maturity of less than three months. Readily convertible to known amount of cash. Little risk that val will change with interest changes. E. g. treasury bills (s-t gov"t de(cid:271)t(cid:895), (cid:373)o(cid:374)ey (cid:373)a(cid:396)ket fu(cid:374)ds, (cid:272)o(cid:373)(cid:373)e(cid:396)(cid:272)ial pape(cid:396) (cid:894)s-t notes payable issued by large corps) Cash flows from operating activities are cash inflows and outflows directly related to earnings from normal operations. Not affected by accruals, deferrals and allocations that result from timing of r&e recognition. Inflows: cash received from: customers, dividends and interest on investments: cash paid for: purchase of goods for resale and services (electricity etc), salaries and wages, income taxes, interest on borrowings. The direct method of presenting the operating activities section of the statement of cash flows reports components of cash flows from operating activities as gross receipts and gross payments. Net cash inflow/outflow from operating activities: the difference between the inflows and outflows.