CFA CFA Level 1 Question of the Week – Financial Reporting – Cash Flows

Question of the Week – Financial Reporting – Cash Flows

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    • exam_whiz
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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
    • swinn004
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      Cash tax payments are operating cash flows. Changes in debt is a financing cash flow. I and III are incorrect.

    • Steven_Elseroad
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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. 

    • Steven_Elseroad
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      misread the question. “Correct” and “incorrect” is a big difference. 

    • exam_whiz
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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.

    • shannondaily
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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. 

    • simply_complex2
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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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