lc26mizzou

AndrewUNH Wrote:
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> Nice explanations here thanks. Summary in my
> words, hope I'm right:
>
> -"finance payables" or borrow cash money from the
> bank in order to pay off your suppliers since you
> don't have money to pay them.
>
> -So that cash i received increases CFF, and me
> paying down my A/P decreases CFO, because that's
> what happens when you pay down A/P
>
> -When you repay the bank later, CFF goes down, but
> nothing happens to CFO, so therefore CFO is
> greater than CFF
>
> This overall process makes the company look @#$%&
> in the short term because they are borrowing money
> to pay their bills, and CFO decreasing looks bad
> (analysts focus on CFO cuz that is the cash flow
> from OPERATIONS, their "core" business supposedly)
>
> But in the future when they pay that loan back
> they look better since they are paying off debt
> and CFO is higher.


I see! Thanks both of you. Just one little doubt left - why do they say that you 'manage the timing of your CFO this way'
Say if I didn't take the financing, I pay payables out of my CFO. I took the financing, I am still paying payables out of my CFO. I increase CFF in first quarter by taking financing and reduce CFF later by paying back the financing. How did I manage the timing of CFO?