CFA Practice Question

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CFA Practice Question

When a firm starts to use the technique of payables financing, the operating cash flow will ______.

A. become lower
B. become higher
C. not change
Correct Answer: A

A financial institution makes payments to a firm's suppliers on behalf of the firm, resulting lower accounts payable and higher short-term debt. Operating cash flow will be lower while total cash flow is unaffected.

User Contributed Comments 7

User Comment
jmcarr02 Well, it has no effect if the firm uses this technique continuously.
chris12345 When a firm STARTS to use.........
cslau83 lower OCF only when reclassify in the corresponding period. IN 1st period OCF still increase.
moneyguy although, cash flows themselves remained unchanged.
johntan1979 Increase in a/p increases CFO. Hence, decrease lowers CFO.
carlo_it bank will make a payment for the firm. i.e.
Ewan2015 Wait why is it not higher? Payment of suppliers is a cash outflow so I should have a higher net cash flow from operations?
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