Definitions of Terms
|Cash equivalents||Short‐term, highly liquid investments that (1) are readily convertible to known amounts of cash and (2) are so near their maturity (maturity of three months or less from the date of purchase by the enterprise) that they present negligible risk of changes in value because of changes in interest rates. Treasury bills, commercial paper, and money market funds are all examples of cash equivalents.|
|Direct method||A method which derives the net cash provided by operating activities from the components of operating cash receipts and payments as opposed to adjusting net income for items not affecting cash.|
|Financing activities||The transactions a firm engages in to acquire and repay capital (e.g., borrowings, sale of capital stock, repayments, etc.).|
|Indirect (reconciliation) method||A method which derives the net cash provided by operating activities by adjusting net income for revenue and expense items not resulting from cash transactions.|
|Investing activities||The transactions the firm engages in which affect its investments in noncurrent assets (e.g., purchase or sale of plant, property, and equipment).|
|Operating activities||The transactions not classified as financing or investing activities, generally involving producing and delivering goods or providing services.|
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