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 are categorized into three categories as follows: • 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: Price Earnings Ratio= Market price per share Earnings per share Requirement-1: To discuss: The definition of Cash flow given by Fool’s School

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Chapter 16, Problem 9BTN

To determine

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 are categorized into three categories as follows:

• 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:

$Price Earnings Ratio= \frac{Market price per share}{Earnings per share}$

Requirement-1:

To discuss: The definition of Cash flow given by Fool’s School

To determine

Requirement-2:

To discuss: The importance of EBIT for analysts

To determine

Requirement-3:

To write: A report on the Fool’s ratio

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