Chapter 4: Analyzing Statements of Cash Flows

In this section

• Linkages among the Cash Flow Statement, Income Statement, and Balance Sheet
  Linkages among the Cash Flow Statement, Income Statement, and Balance Sheet (CFA Level 1): Interconnected Nature of the Three Statements and Starting with Accruals vs. Cash. Key definitions, formulas, and exam tips.
• Direct vs. Indirect Methods of Reporting
  Direct vs. Indirect Methods of Reporting (CFA Level 1): Direct Method, Advantages of the Direct Method, and Disadvantages of the Direct Method. Key definitions, formulas, and exam tips.
• Free Cash Flow (FCFF and FCFE) and Coverage Ratios
  Free Cash Flow (FCFF and FCFE) and Coverage Ratios (CFA Level 1): Key Concepts in Free Cash Flow Analysis, Free Cash Flow to the Firm (FCFF), and Free Cash Flow to Equity (FCFE). Key definitions, formulas, and exam tips.
• Interpreting and Evaluating Operating, Investing, and Financing Cash Flows
  Interpreting and Evaluating Operating, Investing, and Financing Cash Flows (CFA Level 1): Operating Activities, Defining Operating Cash Flow, and Evaluating the Quality of Operating Cash Flows. Key definitions, formulas, and exam tips.
• Disclosures of Noncash Transactions
  Disclosures of Noncash Transactions (CFA Level 1): Understanding the Purpose of Noncash Transaction Disclosures, Why Noncash Items Aren’t on the Main Statement, and Common Types of Noncash Transactions. Key definitions, formulas, and exam tips.
• Adjustments for Non-Recurring Cash Flows
  Adjustments for Non-Recurring Cash Flows (CFA Level 1): Why Adjustment Is Important, Common Types of Non-Recurring Cash Flows, and Analytical Approach to Adjusting Non-Recurring Items. Key definitions, formulas, and exam tips.
• Classification of Operating vs. Investing Cash Flows under IFRS vs. US GAAP
  Classification of Operating vs. Investing Cash Flows under IFRS vs. US GAAP (CFA Level 1): Core Principles of the Statement of Cash Flows and IFRS Classification Flexibility. Key definitions, formulas, and exam tips.
• Evaluating the Quality of Cash Flow from Operations
  Evaluating the Quality of Cash Flow from Operations (CFA Level 1): Importance of CFO Quality, Relevance to Analysts and Investors, and When CFO Diverges from Net Income. Key definitions, formulas, and exam tips.
• Interim Cash Flow Reporting Considerations
  Interim Cash Flow Reporting Considerations (CFA Level 1): Significance of Interim Reporting, IFRS (IAS 34) vs. US GAAP (ASC 270), and Potential Seasonality and Cyclicality. Key definitions, formulas, and exam tips.
• Seasonality Impact on Cash Flows
  Seasonality Impact on Cash Flows (CFA Level 1): Nature of Seasonality in Cash Flows, Practical Case: A Personal Anecdote, and Identifying Seasonal Patterns. Key definitions, formulas, and exam tips.
• Cross-Reference to Stress Testing (see 14, 16)
  Cross-Reference to Stress Testing (see 14, 16) (CFA Level 1): Linking Historical Cash Flows to Stress Tests, Stress Testing for Financial Institutions (Preview of Chapter, and Capital Adequacy and Cash Flows. Key definitions, formulas, and exam tips.