Page 49 - FINAL CFA I SLIDES JUNE 2019 DAY 7
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Session Unit 7:
26. Understanding Cash Flow Statements
LOS 26.f: Describe the steps in the preparation of direct and indirect cash flow statements, including
how cash flows can be computed using income statement and balance sheet data., p.109
For direct and indirect methods, remember the following points:
• CFO is calculated differently, but the result is the same under both methods.
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• The calculation of CFI and CFF is identical under both methods.
• Asset -Inverse relationship: Increase in an asset account decrease in cash and vice versa!
• Liability - Direct relationship : Increase in a liability account increase in cash and vice versa!
