CFA Level I · CFA Level I Exam · Analyzing Statements of Cash Flows II
In a common-size cash flow statement prepared using the total-cash-inflows and total-cash-outflows approach, each operating, investing and financing inflow line item is most likely expressed as a percentage of:
Each inflow line is expressed as a percentage of total cash inflows, and each outflow line as a percentage of total cash outflows. This approach shows the composition of sources and uses of cash. Revenue is a different base, used in the other common-size approach.
- Anet change in cash for the period
- Btotal cash inflowsCorrect
- Crevenue
Explanation
Under the approach that uses total inflows and total outflows, each inflow item is divided by total cash inflows and each outflow item by total cash outflows. Net change in cash can be zero or negative, so it is an unsuitable base. Revenue is the alternative base in the other approach, which applies to all items.
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