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SPE

So this question is part of a vignette i’m conflicted on:

If company blah sells its receivables to an SPE, its consolidated financial results will most likely show:

a) higher revenue

b) same cash balance at year end

c) same accounts receivable balance at year end.

thanks

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What are your thoughts on this?

Simplify the complicated side; don't complify the simplicated side.

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I thought it’s both B and C… because dr cash cr AR when the company sells to the SPE. Then the SPE will dr AR cr cash and upon consolidation those two will wash…

but obviously you can’t choose two. So i think i’m missing something here

The SPE will have to get cash to buy the receivables (usually by issuing bonds), and it may get more cash than the cost of the receivables.

Simplify the complicated side; don't complify the simplicated side.

Financial Exam Help 123: The place to get help for the CFA® exams
http://financialexamhelp123.com/

i see… ok thanks

You’re welcome.

Simplify the complicated side; don't complify the simplicated side.

Financial Exam Help 123: The place to get help for the CFA® exams
http://financialexamhelp123.com/