CFA Practice Question

There are 90 practice questions for this study session.

CFA Practice Question

Select the correct statement(s) regarding sales of receivables.

I. An outright sale or securitization of accounts receivable transfers what would be future operating cash flow into the current period.
II. An outright sale or securitization of accounts receivable transfers current operating cash flow into future periods.
III. In the future, if a company sought to reduce the amount of receivables sold or securitized, operating cash flow would rise.
IV. Only an incremental amount of receivables sold would serve to increase operating cash flow.
A. II, III and IV
B. I and IV
C. II and III
Explanation: III. Operating cash flow would decline instead.

User Contributed Comments 3

User Comment
langy If a company reduced the amount of of receivables sold or securitized, wouldn't it increase cash flows?... you are not paying the fees or not giving discounts to the people buying them/securitizing them. I would assume it would be cheaper to keep the receivables than to sell them?
Inspector selling or securitizing receivables is like going to the pawn shop for fast money, you get a chunk of cash instantly. Sure it is less but it might take you 2 years to collect it naturally. Any yes the total cash flow will be more by not selling but it won't be noticeable until the end months in year 2.
cosmos1994 Inspector that explanation helped me out so much :)
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