Page 12 - FINAL CFA I SLIDES JUNE 2019 DAY 11
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LOS 38.a: Describe primary and secondary sources of Session Unit 11:
liquidity and factors that influence a company’s
liquidity position., p.81 38. Working Capital Management
Primary sources of liquidity -cash from normal day-to-day operations:
• Sales, collecting receivables, and short-term investments; trade credit and lines of credit from banks.
• E.g. liquidating short-term or long-lived assets,
Secondary sources •
(D or Equity) can alter Re-negotiating debt agreements, or filing for
company’s financial bankruptcy and reorganizing the company.
structure and Factors impacting liquidity position:
operations! Effective cash flow management of a firm’s cash inflows and outflows:
tanties
•
Drags on liquidity delay or reduced cash inflows (bad debts, obsolete
inventory);
• Pulls on liquidity accelerate cash outflows (paying vendors sooner).
LOS 38.b: Compare a company’s
liquidity measures with those of
peer companies., p.82
