CFA Latest CFA Level 1 Discussions Question of the Week – Corporate Finance

Question of the Week – Corporate Finance

  • This topic has 3 replies, 3 voices, and was last updated Jan-18 by RoyD.
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    • AdaptPrep
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      Which of the following examples would best be described as a drag on liquidity?

      • Early payment to creditors
      • A delinquent account receivable
      • A reduced line of credit
    • AdaptPrep
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      In basic terms, for a company to be liquid, money must come in before it
      goes out. There are 2 potential difficulties; drags and pulls. A drag is when
      the money doesn’t come in when expected (such as an account receivable
      being late
       or uncollectible). A pull is when the money must go out
      sooner than expected (such as a reduced line of credit, or early payments).

    • shannondaily
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      Woo! I got it right. 🙂 

    • RoyD
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      Doesn’t a reduced line of credit mean that it’s difficult to get credit now which is an unexpected reduction in money coming in?

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