Can anyone help me explain? I cannot recall reading the comparision between securitize and borrow agains A/R implications. ____ In order to finance its accounts receivable, firm A is considering two alternatives. The first alternative is to borrow against the receivables. The second alternative is to securitize the receivables through a special purpose entity. Which alternative would result in lower operating cash flow and lower financing cash flow? Lower operating cash flow Lower financing cash flow A) Securitize Securitize B) Securitize Borrow C) Borrow Securitize Thanks
My view. Borrowing against A/R sounds like using A/R as a collateral for financing. Therefore, Increase in CFF. Securitizing A/R - Packaging A/R into a SPE and selling. Direct inflow of CFO.
Nice, I think that makes sense. DO you recall reading this anywhere in the curriculum or so?
I believe there is a section in FRA about A/R Securitization (with recourse) and the adjustments required for comparisons. I believe it is in the same sections as stretching out payables (if my memory serves me right, in the last couple readings in FRA)
I think it’s there in last study session of FRA.