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CFA Level I · CFA Level I Exam · Introduction to Financial Statement Analysis

Which of the following best describes the main purpose of the statement of cash flows in financial statement analysis?

The statement of cash flows reports the company's cash receipts and payments during the period, classified into operating, investing and financing activities. It does not measure the market value of assets, and it does not reconcile revenues to dividend policy or share count.

  1. AIt reports cash receipts and payments classified as operating, investing and financingCorrect
  2. BIt reconciles the company's accrual-based revenues to its dividend policy and share count
  3. CIt measures the market value of the company's assets at the reporting date

Explanation

The cash flow statement shows cash receipts and payments by operating, investing and financing activities. It does not measure market values of assets, and it is not a reconciliation to dividend policy.

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