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Question of the Week – Financial Reporting – Cash Flows

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    • Avatar of exam_whizexam_whiz
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        • Undecided
        27 Nov 2017 at 8:25 am
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        Which of the following statements relating to cash flows classification is/are incorrect? 

        I: Cash collections from sales are operating cash flows whereas cash tax payments are financing cash flows. 
        II: Cash used for purchase of property, plant and equipment and cash generated from sale of assets are examples of investing cash flows. 
        III: Changes in debt are operating cash flows whereas sale/repurchase of stocks are financing cash flows.
        • Both statements I and III are incorrect
        • Only statement III is incorrect
        • Only statement II is incorrect
      • Avatar of Steven_ElseroadSteven_Elseroad
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          30 Nov 2017 at 11:29 am
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          This is a poorly worded question. There is no mention of what reporting standard is being used (IFRS or US GAAP), which would make a difference in many cases. 

        • Avatar of swinn004swinn004
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            27 Nov 2017 at 9:46 pm
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            Cash tax payments are operating cash flows. Changes in debt is a financing cash flow. I and III are incorrect.

          • Avatar of exam_whizexam_whiz
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              • Undecided
              01 Dec 2017 at 9:21 pm
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               Correct Answer:  A

              Cash tax payments are operating cash flows so statement I is incorrect. Changes in debt are financing cash flows so statement III is incorrect.

            • Avatar of Steven_ElseroadSteven_Elseroad
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                30 Nov 2017 at 11:31 am
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                misread the question. “Correct” and “incorrect” is a big difference. 

              • Avatar of shannondailyshannondaily
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                  14 Jan 2018 at 4:18 pm
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                  I misread it too. My cat got in the way. I just got back from a 4 day trip for a CFA prep course. She hasn’t left my side since I got back. 

                • Avatar of simply_complex2simply_complex2
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                    • CFA Level 1
                    15 Jan 2018 at 1:19 am
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                    @shannondaily my cat would sit on my laptop/books if i don’t play with her or try to study…at one point i was considering hiding in the bathroom to study since she’s scared of bathtubs and wouldn’t follow me there

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