- 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
A loss on the sale of property, plant, and equipment should be ______ in computing cash flow from operating activities.
A. added to net income
B. subtracted from net income
C. subtracted from net sales
Explanation: A loss on the sale of a long-lived asset is subtracted in determining net income. Because a loss on the sale of a long-lived asset does not represent an operating activity, it must be added to net income to determine cash flow from operating activities.
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