- CFA Exams
- CFA Level I Exam
- Study Session 7. Financial Reporting and Analysis (2)
- Reading 23. Understanding Cash Flow Statements
- Subject 2. Preparing the Cash Flow Statement
CFA Practice Question
An important distinction between the direct method and the indirect method of preparing a statement of cash flows is that ______
A. the direct method reconciles accrual-based net income with net cash flow from operations; the indirect method shows the specific cash inflows and outflows constituting the operating activities.
B. both methods result in the same dollar amount of net cash flows from operating activities.
C. the format of the section computing net cash flow from operating activities is different under the two methods.
User Contributed Comments 2
| User | Comment |
|---|---|
| murli | B is also true, but it is a similarity between the two methods while question is about the difference! |
| Rsanches | Good point, murli. We must pay attention to the keywords. |