CFA Practice Question

There are 534 practice questions for this study session.

CFA Practice Question

Which of the following statement(s) is (are) true?

I. Cash flow is a term that describes both cash receipts and cash payments.
II. The summary of transactions for issuing bonds is shown as an investing activity on the statement of cash flows.
III. The cash sale of a plant asset for an amount greater than its book value would be shown on the statement of cash flows as a financing activity.
IV. The sale of an investment for less than its cost would be shown on the statement of cash flows as an operating activity.
A. I and II
B. I only
C. I and IV
Explanation: I. Cash flow is a term describing both cash receipts (inflows) and cash payments (outflows).
II, III and IV: Investing activities are transactions involving acquisitions or sales of investments or plant assets.

User Contributed Comments 7

User Comment
shasha issuing bond - CFF
danrow Why not D???
Shamrockelly I do not think that IV is clear - In the indirect method you start with Net Income and adjust for gain/loss on sale - hence cfo.
MFTIOA sold for less than its cost = loss on sale of assets, which is added to CFO
steved333 The gain or loss from the sale is recorded in the operations section, but the sale itself is under investing. So IV is incorrect.
jjhigdon This tricked me. The Loss from the sale of an asset would be operating. Therefore, IV would be correct since part of the sale transaction would be reflected in the operating section.
thanhb91 jjhigdon i think you mess up between cash flow and income statement. Under cash flow statement, only cash receipt and payment from dealing or trading securities or short term securities are under operating cash flow. Otherwise, long term or securities hold for investment purpose should be treated as investment cash flow
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