Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

Financial Accounting

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

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Multiple Choice

Using the top-down approach, operating cash flow (OCF) is calculated by subtracting costs and which of the following from sales?

Interest expense

Taxes

Depreciation

Dividends

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Verified step by step guidance

Understand the concept of Operating Cash Flow (OCF): OCF represents the cash generated by a company's core business operations, excluding costs related to financing and investing activities.

Learn the top-down approach to calculate OCF: This method starts with sales revenue and subtracts costs and other relevant expenses to arrive at the operating cash flow.

Identify the components to subtract from sales: In the top-down approach, costs, taxes, and non-cash expenses like depreciation are subtracted from sales revenue to calculate OCF. Interest expense and dividends are not included in this calculation as they are financing activities.

Recognize the role of taxes: Taxes are subtracted because they represent a cash outflow directly related to the company's operations.

Understand why depreciation is included: Depreciation is a non-cash expense, and while it is subtracted in the calculation, it does not affect the actual cash flow. It is included to align the calculation with accounting principles.