- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 4. Analyzing Statements of Cash Flows I
- Subject 3. Cash Flows from Operating Activities: The Direct Method
CFA Practice Question
Which of the following would represent an inflow of cash in determining cash flow from operating activities using the direct method?
B. An increase in inventory
C. A decrease in accounts payable
D. Depreciation
A. A decrease in accounts receivable
B. An increase in inventory
C. A decrease in accounts payable
D. Depreciation
Correct Answer: A
A decrease in accounts receivable represents a collection of accounts receivable, which is an inflow of cash from an operating activity.
User Contributed Comments 4
| User | Comment |
|---|---|
| choas69 | add: decrease in CA less: increase in CA add: increase in CL less: decrease in CL |
| choas69 | CA inverse relationship CL direct relationship |
| mlaique | Why not depreciation? |
| lndcobra | I would argue none, as a decrease in accounts receivable could mean writing off a loss, therefore, no cash transaction! But out of the 4, it is the only "inflow" |