CFA Level I · CFA Level I Exam · Analyzing Statements of Cash Flows I
A company reports sales of 900, and accounts receivable rose from 120 to 150 during the year. Using the direct method, cash collected from customers is closest to:
Cash collected from customers is about 870. Sales of 900 are reduced by the 30 increase in receivables, because that part of revenue has not yet been collected in cash. Adding the increase instead would wrongly overstate collections at 930.
- A870Correct
- B930
- C1,020
Explanation
Cash collected = sales - increase in receivables = 900 - 30 = 870. Adding the increase (930) is the wrong sign. 1,020 adds the opening balance to sales, which is meaningless here.
Did you get it right without looking?
One question tells you little. A timed set on Analyzing Statements of Cash Flows I shows your real accuracy, how long you take and where you lose marks.
More Analyzing Statements of Cash Flows I questions
- An analyst reconciles a company's statement of cash flows with its income statement and balance sheet. During the year, accounts receivable …
- An analyst has only indirect-method statements and wants to estimate cash paid to suppliers. Which approach is most appropriate?
- For the year, a company reports net income of 500, including a gain on sale of equipment of 30 and depreciation of 80. Accounts receivable i…
- A company using the indirect method reports net income of 400, depreciation of 80, a gain on sale of equipment of 30, an increase in invento…
- Under IFRS, a company using the indirect method would most likely classify interest paid as:
- Which item is most likely to be disclosed only under the direct method, or be separately visible only in that presentation, rather than appe…