Glossary: M04 Cash Flows I

TermDefinition
Cash Flow from Operations (CFO)Cash generated from core business activities
Cash Flow from Investing (CFI)Cash used for or generated from purchase/sale of long-term assets and investments
Cash Flow from Financing (CFF)Cash from or used for capital structure transactions (debt, equity, dividends)
Direct MethodCFO presentation showing actual cash receipts and payments
Indirect MethodCFO presentation starting with net income and adjusting for non-cash items and working capital changes
Non-cash Investing/Financing ActivitiesTransactions not involving cash but affecting assets/liabilities (e.g., debt-for-equity swap); disclosed separately
Depreciation Add-backNon-cash expense added back to net income under indirect method
Working Capital ChangesChanges in current assets and current liabilities that affect CFO
Cash EquivalentsShort-term, highly liquid investments readily convertible to cash (maturity 3 months)
Capital Expenditure (CAPEX)Cash spent on acquiring or improving long-term assets; reported in CFI
Operating Cash Flow RatioCFO divided by current liabilities; measures ability to cover short-term obligations
Cash ConversionProcess of converting accrual-based income to cash-basis
Accrual-to-Cash AdjustmentAdjustments to convert revenue/expenses from accrual to cash basis
Net Cash PositionCash and equivalents minus short-term borrowings
Cash Flow AdequacyAssessment of whether CFO is sufficient to cover capital expenditures and debt repayment