CFA Level 1: The statement of cash flows and its limitations

The limitations of the statement of cash flows

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Question

The statement of cash flows cannot be used to

Answers

A. consider the interrelationship between cash flow components over time.

B. examine the trend of different cash flow components over time.

C. examine the cash flow components and their relationship to related income statement items.

D. review individual cash flow items for analytic significance.

E. examine the firm's ability to realize assets and settle liabilities.

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Explanations

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A. B. C. D. E.

Income statement and balance sheet data must be combined with cash flows for insights into the firm's ability to realize assets based on reported revenues and settle liabilities resulting from accrued expenses.

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