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Basic Question 1 of 9

Which statement is true?

A. Cash flow is real and not subject to the vagaries of GAAP or the whims of the accountants.
B. Cash flow is measured by a standardized, immutable process, without the assumptions and interpretations that are inherent in the measurement of accrual-based income.
C. Because they can be readily confirmed, the balance in cash at period's end and the total change in cash during a reporting period are not prone to misstatement.

User Contributed Comments 2

User Comment
Inaganti6 How can you know unless you check the company's bank accounts ? This is really over optimistic I think. Anyone from India who remembers the Satyam scandal knows how imprudent it would be to believe the cash balance is accurate.
sshetty2 In the US at least; publicly traded companies have to release financial statements that have been audited
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Craig Baugh

Craig Baugh

Learning Outcome Statements

describe indicators of cash flow quality;

evaluate the cash flow quality of a company;

CFA® 2024 Level II Curriculum, Volume 2, Module 15.