The Inclusion of Short-term Investments in Operating Cash Flow
Mulford, Charles W.
Ely, Michael L.
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Companies use short-term investments as a vehicle to park surplus cash. When such investments are classified as trading securities, cash used in their purchase and proceeds provided from their sale are included in operating cash flow. Classifying cash flow from trading securities as operating by non-financial companies can mislead users of financial statements regarding a company’s ability to generate cash flow from sustainable sources. In this report we survey the practices of non-financial companies regarding their inclusion of cash provided (used) by trading securities in operating cash flow.