Examples of operating activities in the following topics:
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- Activities of the business include operating activities and non-operating activities such as investing activities, and financing activities.
- Activities of the business include operating activities, investing activities, and financing activities .
- In addition to operating activities businesses engage in non-operating activities.
- Non-operating activities are not related to the day-to-day, ongoing operations of a business.
- As with operating activities GAAP principles dictate how non-operating items are classified on the statement of cash flows.
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- There is an indirect and a direct method for calculating cash flows from operating activities.
- The resale of assets is normally reported as an investing activity unless it involves the purchase and sale of inventory, in which case it is reported as an operating activity.
- There are two different methods that can be used to report the cash flows of operating activities: the direct method and the indirect method .
- For items that normally appear on the income statement, cash flows from operating activities display the net amount of cash that was received or disbursed during a given period of time.
- Once the cash inflows and outflows from operating activities are calculated, they are added together in the "Operating Activities" section of the cash flow statement to obtain the net cash flow for a company's operating activities.
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- There are two different methods that can be used to report the cash flows of operating activities.
- The following rules can be followed to calculate cash flows from operating activities:
- Under the indirect method, since net income is a starting point in measuring cash flows from operating activities, depreciation expenses must be added back to net income.
- Therefore, cash operating expenses were only $80,000.
- The net cash flow from operating activities, before taxes, would be:
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- Cash inflows or other enhancements of assets of an entity during a period from delivering or producing goods, rendering services, or other activities constitute the entity's ongoing major operations.
- Cash outflows or other using-up of assets or incurrence of liabilities during a period from delivering or producing goods, rendering services, or carrying out other activities constitute the entity's ongoing major operations.
- Other revenues or gains include those from other than primary business activities (e.g., rent, income from patents).
- Restructurings of the activities of an entity and reversals of any provisions for the costs of restructuring
- Explain the difference between the operating and non-operating section of the income statement
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- The statement of cash flows is a cash basis report on three types of financial activities: operating activities, investing activities, and financing activities.
- Any non-cash activities are usually reported in footnotes.
- These include the cash inflows and outflows of all transactions related to core activities of the business.
- Investing activities include all transactions related to the acquisition or disposal of non-current assets.
- Describe the effect operating, investing and financing activities have on the statement of cash flows, and how that statement differs from the income statement
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- Accounting outputs are financial statements that detail the financial activities of a business, person, or other entity.
- A financial statement, or financial report, is a formal record of the financial activities of a business, person, or other entity.
- A profit and loss statement provides information on the operation of the enterprise.
- This statement reports on a company's cash flow activities—particularly its operating, investing, and financing activities.
- Owners and managers require financial statements to make business decisions that affect continued operations.
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- Cash flow is the movement of money into or out of a business, project, or financial product from operating, investing, and financing activities.
- For example, a company may be profitable but generate little operational cash (as may be the case for a company that barters its products rather than selling for cash or when its accounts receivable turnover is long).
- In such cases if needed, the company may derive additional operating cash by issuing shares, raising additional debt finance, or selling its assets.
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- The income statement reflects a company's operating performance.
- It then calculates operating expenses and, when deducted from the gross profit, yields income from operations.
- When combined with income from operations, this yields income before taxes.
- Operating income occurs from any activity that is a direct result of its primary business, such as sales of goods and services.
- Non-operating income, in accounting and finance, is gains or losses from sources not related to the typical activities of the business or organization.
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- The statement of cash flows highlights the activities that directly and indirectly affect a company's overall cash balance.
- The statement of cash flows lists all cash inflows and outflows during a reporting period from operating, investing and financing activities.
- Operating activities - principal revenue-producing activities of the company and other activities that are not investing or financing activities.
- Investing activities - the acquisition and disposal of long term assets and other investments not included in cash equivalents.
- Financing activities - activities that result in changes in the size and composition of the equity capital and borrowings of the enterprise.
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- Working capital is a financial metric that represents the operational liquidity of a business, organization, or other entity.
- Along with fixed assets, such as property, plant, and equipment, working capital is considered a part of operating capital.
- Positive working capital is required to ensure that a firm is able to continue its operations and has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses.
- The goal of working capital management is to ensure that the firm is able to continue its operations and that it has sufficient cash flow to satisfy both maturing short-term debt and upcoming operational expenses.
- Because this number effectively corresponds to the time that the firm's cash is tied up in operations and unavailable for other activities, management generally aims for a low net count.