It seems like unrealized gains/losses on trading securities would be a non-cash transaction recorded in OCI.
I just took a Schweser quiz where they qualified unrealized trading security gains as a subtraction on CFO.
I could see how an increase in cash, even unrealized, would be an increase of a current asset, thusly being subtracted from the CFO, but why is this not noncash?
Nope; unrealized gains/losses on trading securities go through the income statement.
Unrealized gains/losses on available-for-sale securities go to OCI.
Noted, thanks for the reply!
That said, why are unrealized gains on trading securities recognized as a subtraction on CFO?
There are a handful of questions I’d like to ask surrounding this if you don’t mind.
Another is, “profit” from sales of PPE are consistently described as CFO, yet purchases/sales of PPE without being tagged as “profit” are consistently described as CFI. What is the basis of this distinction?
The gain is included in net income, but it’s not a cash inflow (it’s unrealized). So, to get to the cash inflows, we have to subtract it.
The gain/loss from the sale of PP&E is included on the income statement. However, selling PP&E is not an operating activity (e.g., McDonald’s is not in the business of selling used french fry machines), so it’s subtracted. Not because it’s not cash, but because it’s not operations.