CFA Level I · CFA Level I Exam · Analyzing Statements of Cash Flows II
A company reports net income of 500, depreciation of 120, an increase in accounts receivable of 80, and an increase in accounts payable of 30. Using the indirect method under IFRS, cash flow from operations is closest to:
Cash flow from operations is 570. Start with net income of 500, add back depreciation of 120, subtract the 80 increase in receivables and add the 30 increase in payables, giving 570.
- A520Correct
- B570
- C670
Explanation
CFO = 500 + 120 - 80 + 30 = 570. Check: 500 + 120 = 620; minus 80 = 540; plus 30 = 570. So 570 is correct, not 520. Correction: the key must match 570.
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