
Concept Introduction:
Cash Flow: Cash flow is the net effect of inflow and outflow of cash. A positive cash flow shows the surplus of the cash and a negative cash flow shows the deficit of the cash in the business.
Cash Flow statement:
The Cash flow statement shows the movement of cash during a particular period. The
• Cash flows from operating activities
• Cash Flows from investing activities
• Cash flows from financing activities
(Note: Cash flows from operating activities can be prepared using direct or indirect method)
Price Earnings Ratio:
The price earnings ratio shows the relationship between price of the share and earnings per share. It is calculated with the help of following formula:
Requirement-1:
To discuss: The definition of Cash flow given by Fool’s School
Requirement-2:
To discuss: The importance of EBIT for analysts
Requirement-3:
To write: A report on the Fool’s ratio

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Chapter 16 Solutions
Connect 2-Semester Access Card for Fundamental Accounting Principles
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- cost accountingarrow_forwardSummit Holdings has $280,000 in accounts receivable that will be collected within 70 days. The company needs cash urgently and decides to factor them, receiving $260,000. Skyline Factoring Company, which took the receivables, collected $275,000 after 85 days. Find the rate of return on this investment for Skyline.arrow_forwardwhat are the variable expenses per unit?arrow_forward
- general accountingarrow_forwardBright Electronics has a Computer Division with the following financial details: • Sales: $250,000 • Cost of Goods Sold: $120,000 Operating Expenses: $50,000 Average Invested Assets: $1,200,000 ⚫ Hurdle Rate: 12%arrow_forwardA business has a dividend payout ratio of 0.6, an expected growth rate of 4% per year, and investors require a 9% return on their investment. What should be the price-earnings ratio? a. 10x b. 12x c. 15x d. 6xarrow_forward
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