cfa-i equity chap 41 q13 (p440)

I thought I had the hang of FCFE questions until running into this one. Why isn’t the increase in current liabilities added as part of net borrowing? Is it because the borrowing is non-interest bearing? Even if this were the case, it still seems like a cash inflow available to equity, so I’m not sure why it’s excluded here. Any ideas?

It’s not Net Borrowing if you’re not paying interest right? So CL says “all non-interest bearing.” That means the CL does not incllude any Notes Payable or Short Term Debt or Current Portion of Short Term Debt. It probably just includes Accounts Payable, which you should not subtract.

The Accounts payable would be subtracted to arrive at your WCInv, though!

CP: that’s what strikes me as weird about this question – you’re given capex, net PP&E and CL. Is this just a really weird way of presenting a b-sheet?

its not really that weird. as cpk says you subtract the CL to get your wcinv. since all CL is nont interest bearing we are to assume that all CL is AP.

thanks for the responses… much appreciated my confusion about presentation is that it looks like there’s double representation of the same items (CL and WCInv), but I think I was just looking at it wrong.