CFA Practice Question

There are 120 practice questions for this study session.

CFA Practice Question

Which one of the following is a source of cash, all other factors being equal?
A. Reducing accounts payable
B. Factoring accounts receivable
C. Retiring commercial paper, or renewing a committed line of credit at a bank
Explanation: Retiring commercial paper is a use of cash. Renewing a committed line of credit is not a source of cash because there is no net change in borrowing ability.

User Contributed Comments 5

User Comment
prachirp what do u mean by factoring?
Kuki i believe factoring would mean collecting. please correct me if i'm wrong!
FinanceAnalyst factoring means selling receivables to factoring company which means source of cash...
ml42085 LOS

Factoring accounts receivable. Factoring is the selling of receivables to a financial institution, the factor, usually "without recourse."

* Factor is often a subsidiary of a bank holding company.
* Factor maintains a credit department and performs credit checks on accounts.
* Allows firm to eliminate their credit department and the associated costs.
* Contracts are usually for 1 year, but are renewable.
bidisha It's when a company sells its doubtful recievables to a collection company.
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