CFA Level I · CFA Level I Exam · Analyzing Statements of Cash Flows II
A company reports revenue of 800 million, cash flow from operating activities of 120 million, capital expenditure of 70 million and dividends paid of 30 million. In a common-size cash flow statement using revenue as the base, cash flow from operating activities is closest to:
Operating cash flow of 120 million divided by revenue of 800 million gives 15.0%. The capital expenditure and dividend figures are irrelevant to this line item. Using revenue as the base expresses each cash flow as a share of sales.
- A12.5% of revenue
- B15.0% of revenueCorrect
- C85.0% of revenue
Explanation
Operating cash flow divided by revenue is 120/800 = 0.15, or 15.0%. The 12.5% figure comes from dividing by 960, which is not a revenue base. The 85.0% figure is an unrelated mix of numbers.
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