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CFA Level I · CFA Level I Exam · Analyzing Statements of Cash Flows II

A company has total cash inflows of 500 million, consisting of operating inflows of 350 million, investing inflows of 50 million and financing inflows of 100 million. Total cash outflows are 450 million, including investing outflows of 180 million. Using the total-inflows and total-outflows approach, the investing activities common-size percentages for inflows and outflows, respectively, are closest to:

Investing inflows are 50/500 = 10% of total inflows, and investing outflows are 180/450 = 40% of total outflows. Each side uses its own total as the base. Dividing outflows by total inflows, or inflows by operating inflows, gives incorrect results.

  1. A10% and 40%Correct
  2. B10% and 36%
  3. C14% and 40%

Explanation

Inflow: 50/500 = 10%. Outflow: 180/450 = 40%. The 36% figure wrongly divides outflows by 500, the inflow base. The 14% figure wrongly divides inflows by 350, the operating inflow figure.

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