When firms sell their accounts receivables, it distorts their CFO but what i was wondering is the impact on CFF and total cash flow if the firm is using the proceeds to reduce their debt?
Wont this deflate CFF by an equal amount while total cash flow remains same?
E.g. Firm sells $10 mn of A/R to reduce debt by $10 mn. Now CFO shows an extra +$10mn but CFF shows a negative 10mn outflow to settle debt while Total cash flow is unaffected.
Please tell me if I am thinking about this the wrong way
I think you are correct. The whoel purpose of the cash flow statement is to show the flows of your cash for the past year and also what is the end result, net cash inflow and outflow for each area and also the real net cash inflow and outflow summation.
So as you said, it has no impact on the final amount but will be a inflow for CFO and outflow for CFF