CFA CFA Level 1 Question of the Week – Corporate Finance

Question of the Week – Corporate Finance

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    • Avatar of AdaptPrepAdaptPrep
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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
      • Avatar of AdaptPrepAdaptPrep
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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).

        • Avatar of shannondailyshannondaily
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            Woo! I got it right. 🙂 

          • Avatar of RoyDRoyD
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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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