CFA Practice Question

There are 534 practice questions for this study session.

CFA Practice Question

The following information is available about a company ($ millions):

Year ended 31 December | 2016 | 2015
Sales | 322.8 | 320.1
Net income | 27.2 | 26.8
Cash flow from operations | 15.3 | 38.1

During 2016 the company most likely decreased the ______.
A. proportion of sales made on a cash basis
B. inventory, anticipating lower demand for its products in 2017
C. proportion of interest-bearing debt relative to trade accounts payable
Explanation: Sales, net income, and net margin are relatively constant for the two years. The substantial drop in cash flow from operations could be attributed to an increase in receivables and/or inventory. A decrease in the proportion of cash sales implies an increase in the proportion of credit sales, increasing accounts receivable. An increase in accounts receivable would decrease cash flow from operations.

User Contributed Comments 1

User Comment
weebe How do we know net margin is constant ?
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