CFA Practice Question

There are 534 practice questions for this study session.

CFA Practice Question

An analyst has put together the following information from an annual report:

What is the cash flow from financing?
A. 165
B. -1,743
C. 1,221
Explanation: Cash flow from financing = 1,056 - 3,042 + 4,002 - 795 = 1,221. Notes payable are a cash flow from financing even though they are listed under current liabilities.

User Contributed Comments 10

User Comment
sbajaj Include notes payable.
Lein English is not my mother tongue and I had difficulty understanding whether notes payable is a form of financing or an operational obligation. Apparently it is a form of financing.
prachirp yes it is.It is a form of debt.
Saibot Why are current liabilities not included? Thank you
SKIA Saibot - current liabilities are a part of CFO, not CFF.
schweitzdm Could someone offer explanation regarding the inclusion of equity for this?

Is it true that we must simply include items that affect equity in our consideration?
michaeloa3 I don't get why notes payable is included. Isn't that a liability account that increased, therefore, no actual cash was outlayed, just an increase in liabilities?
Inaganti6 @michael

the cash flow statement is only concerned with inflow and outflow, you're overthinking it. the increase in notes payable means the company borrowed cash . that cash coming in is a positive 1056 on the CFF section to represent that.
dquang225 Notes Payable can be either Current or Non-Current. However in this case, it is Non-Current. Look at the order of the data presented. Notes Payable is listed below Other Current Liabilities, therefore it is implied that Notes Payable is non current. Thus, we will add it to the calculation of Financing Cash Flow.
liuzitong Notes Payable.
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