Q10 p.586 of CFA Curriculum v.3
Why do the securitization of accounts receivables will result in a frequently sold at a gain in operating cash flow?
By securitzin AR, AR balance on B/S is reduced, cash is received thus CFO is increased. Gains arise when the amount received from AR is greater than the book value of AR. BV of AR is dependent on assumptions of default rate, discount rate used for PV of AR etc.
A/R goes down cuz you are selling it off, therefore cash goes up and it is classified as CFO
Thanks guys!