Term
| Stretching accounts payable by delaying payment... |
|
Definition
| is not a sustainable source of operating cash flow. Suppliers may refuse to extend credit because of the slower payments. |
|
|
Term
| Stretching accounts payable can be identified by... |
|
Definition
| increases in the number of days payable. |
|
|
Term
| A method of decreasing operating cash flows in a period of seasonally high CFO and increase them in a subsequent period is... |
|
Definition
| arranging for a third party to finance a firm's payables in one period, so that the firm can account for repayment as a financing (rather than operating) cash flow in a later period. |
|
|
Term
| Securitizing accounts receivable... |
|
Definition
| accelerates operating cash flow into the current period, but this source of cash is not sustainable and artificially increases receivables turnover. Securitizing receivables may also allow the firm to immediately recognize gains in the income statement. |
|
|
Term
| Some firms repurchase stock to... |
|
Definition
| offset the dilutive effect of the exercise of employee stock options. The analyst must determine whether the increase in operating cash flow resulting from the income tax benefits of the exercise of employee stock options is sustainable. For analysis, the net cash outflow to repurchase stock should be considered an operating activity instead of a financing activity, since it is essentially a compensation expense. |
|
|
