CFA Practice Question

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CFA Practice Question

Which one of the following is a financing activity?

A. Writing off an account receivable as uncollectible
B. Selling debt investments
C. Repaying a bank loan
D. Selling equipment at a loss
Correct Answer: C

Both obtaining and repaying loans are considered financing activities.

User Contributed Comments 9

User Comment
Shelton A-CFO
Khadria Making and collecting loans = CFI
Borrowing and Repaying = CFF
maria15 Thanks Khadria
moneyguy But not the interest paid on that loan. That's operating activity.
johntan1979 Yes, Shelton.

Shaan23 It's soo odd. Comparing to other questions

Selling bonds at excess to Par --- CFF
Selling Equity ----- CFI
Selling Debt investments ---- CFI

I thought debt investments would be considered the same as bonds at excess to par but nope.
syazwan21 Shaan23:

Well I guess that Selling bonds at excess to par implies raising money for your own company for operations while selling debt investments could mean selling bonds of other companies for profit. Thats why the difference.
CJHughes CFF - selling (issuing) bonds at par and then redeeming later at par. Can't say i've ever seen a bond issued above par. Who would buy it? You would only get par at redemption. (This does not take into consideration bonds with inbuilt call options, which may be called (redeemed) at a premium. They are another matter).

CFO - buying/selling bonds above, below, at par (whatever market value at time) and realising gains/losses on their purchases later when they need to generate cash for operations.
CJHughes That comment is incorrect. Bonds can be issued above or below par. My mistake. Rarely would they be issued with a Premium. However, a discount is common when the issuer needs to attract demand.
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