Does securitizes of receivables increase CFO or CFF

Hi friends, i like to check if securitizes of receivables means sale of receivables? If it is, does it : a) increase CFO only as with a reduction in account receivables, it will add the reduced amount into CFO or b) it increase the CFF because securitizes of receivables is treated as borrowings and increase CFO as with a reduction in account receivables, it will add the reduced amount into CFO thanks:)

It will increase your CFO an amount equal to the cash you receive from the “sale” of those “securities”. THerefore your CFO in this case is higher than if you borrow against your A/R ( which would be treated as an increase in CFF)

oh i see… that helps thanks:)

Hi, Just a bit confused with the way of treating the receivables. i just read that factoring of receivables is the sale of receivables and the buyer of the receivables will take on the collecting of the receivables Securitization of receivables is the sale of receivables but the seller still takes on collecting of receivables. Just to check does these 2 consider as increase in CFO?

Well it depends who CFOs are you talking about. When you sell the receivable, company selling it has immediate gain from the transaction and company doesn’t need to worry about collection and the loan. Collection agencies are counter party in this case. Collection agency looks at the receivable quote the price looking at the nature of customers, bad debt history etc and buy it either at market price, more than market price, or less than market price. Securitization is done through SPVs. This is basically to reduce the borrowing cost but remember SPVs are also part of the company itself. While reporting you will have to incorporate the data for SPV as well but while taking loan since it’s a separate entity, borrowing cost will be lower, especially if the parent firm is not doing good. Parent firm will get the loan at higher price but SPV will be able to get a much lower price.