CFA Practice Question

There are 534 practice questions for this study session.

CFA Practice Question

Which of the following would not appear in the operating activities section of the statement of cash flows?

A. Cash collected from customers for goods and services
B. Cash payments to employees for salaries, wages, benefits, etc.
C. Cash payments for income taxes
D. Cash payments made on borrowings (repaying the amounts borrowed)
Correct Answer: D

Cash transactions relating to a firm's own debt or equity are classified as financing activities according to SFAS No. 95. Note that D does not include interest payments!

User Contributed Comments 9

User Comment
Studog Interest on borrowings would be operating cashflow?
Gina yes
myanmar what about zero bonds?
bahodir When zero coupon bonds are issued, interest is included in the principal amount or face value of the bonds. Although coupon payments are not made during the life of the bonds, the company accrues interest expense on them, which is paid when the bonds are repurchased or redeemed at maturity. Hence, when a company repurchases or redeems zero coupon bonds, it should classify the cash outflow for the repayment of principal amount received from bondholders as a financing use of cash and the amount paid in excess of the principal as operating use of cash.
mirfanrana cashh transaction relating to firms own debt or equity are classified as finacing activity.
boddunah zero coupons are issued at discount.it is financing acctivity.no interest paid . no operating activity. when zeros are paid financing cash ouflow.
johntan1979 If it is cash payments received on borrowings, it is investing activity.
robbiecow Always think of the Direct Method for CFO and it will help with these types of questions.

CFO
= Cash Received from Customers
- Cash Paid in the Production of Goods and Services
- Cash Paid for Operating Expenses
- Cash Paid for Interest
- Cash Paid for Taxes
sshetty2 I believe as per the answer to this question, they mean cash payments towards the principle of a 'borrowing' would be classified as a financing activity. Cash payments for interest would be classified as an operating activity.
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