How to Ace Cash Flow Statement Questions on Your Exam

Have you ever stared at a Cash Flow Statement problem and felt like you were reading another language? You aren't alone. Let's break down exactly why this trips up so many students.

The 3-Step Exam Strategy

1. Isolate: Extract the exact variables from the prompt.
2. Anticipate the Trap: The professor is betting you will end up confusing investing cash flow with operating cash flow. Know this before you write your first line.
3. Execute: Follow the algorithm. For instance: Buying equipment is an 'Investing' outflow. Paying employees is an 'Operating' outflow. A company can have positive operating cash but negative total cash if they are buying heavy machinery..

If you get stuck, do not burn 15 minutes staring at it. Write down the formula, get partial credit, and move on.

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