Chartered Financial Analyst (CFA) Practice Exam Level 2

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What type of cash flows are included in the Statement of Cash Flows (SCF)?

Cash Flows from Investing Activities
Cash Receipts from Customers
Cash Flows from Financing Activities
Non-Cash Investing Activities

The correct answer is: Cash Receipts from Customers

The Statement of Cash Flows (SCF) provides a comprehensive overview of cash inflows and outflows during a specific period, categorized into three main activities: operating, investing, and financing. Cash receipts from customers are a fundamental component of the cash flows from operating activities section. This represents the cash generated from the core business operations, emphasizing the organization's ability to generate cash from its primary revenue-generating activities. While cash flows from investing activities and cash flows from financing activities are also crucial components of the SCF, they pertain to specific transactions such as purchasing and selling assets or obtaining and repaying capital. Non-cash investing activities, on the other hand, are not included in the SCF because they do not involve actual cash transactions, even though they might significantly impact a company's financial position. By focusing on the cash receipts from customers, you're highlighting the operational efficiency and liquidity of the business, which are crucial for assessing its financial health.