CFA Level I · CFA Level I Exam · Analyzing Statements of Cash Flows I
Under US GAAP, which of the following items is most likely classified as a financing cash flow?
Repayment of bank loan principal is a financing outflow under US GAAP. Interest paid on the loan and interest received on investments are both classified as operating cash flows, since they enter net income, whereas principal repayments involve returning capital to creditors.
- AInterest received on a corporate bond held
- BRepayment of the principal of a bank loanCorrect
- CInterest paid on a bank loan
Explanation
Under US GAAP, principal repayments of debt are financing outflows. Interest paid and interest received are both operating items.
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