- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 10. Financial Reporting Quality
- Subject 4. Detection of Financial Reporting Quality Issues
CFA Practice Question
When a firm starts to use the technique of payables financing, the operating cash flow will ______.
B. become higher
C. not change
A. become lower
B. become higher
C. not change
Correct Answer: A
A financial institution makes payments to a firm's suppliers on behalf of the firm, resulting lower accounts payable and higher short-term debt. Operating cash flow will be lower while total cash flow is unaffected.
User Contributed Comments 7
| User | Comment |
|---|---|
| jmcarr02 | Well, it has no effect if the firm uses this technique continuously. |
| chris12345 | When a firm STARTS to use......... |
| cslau83 | lower OCF only when reclassify in the corresponding period. IN 1st period OCF still increase. |
| moneyguy | although, cash flows themselves remained unchanged. |
| johntan1979 | Increase in a/p increases CFO. Hence, decrease lowers CFO. |
| carlo_it | bank will make a payment for the firm. i.e. |
| Ewan2015 | Wait why is it not higher? Payment of suppliers is a cash outflow so I should have a higher net cash flow from operations? |