- CFA Exams
- CFA Level I Exam
- Topic 3. Corporate Issuers
- Learning Module 4. Working Capital and Liquidity
- Subject 3. Managing Working Capital and Liquidity
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. |