Accounts receivables increase by $100 (tax 40%) How will it impact on FCFF/FCFE? Will it decrease by 100? Or by 40? My thought: in case of increasing AR we recognize revenue in IS, So revenue is up by 100, Net income is up by 60 In CFS we substract AR, so CFO is down by 40 -> FCFF/FCFE down by 40? Am I wrong?
Career Resources
Career Advancement Opportunities
November 2026 Investment Banking
-
Evercore 01 99.5%
-
Moelis & Company 01 99.0%
-
JPMorgan 01 98.4%
-
Guggenheim Partners 02 97.9%
-
Morgan Stanley 06 97.4%
Overall Employee Satisfaction
November 2026 Investment Banking
-
Moelis & Company No 99.5%
-
Morgan Stanley 02 99.0%
-
Evercore 01 98.4%
-
Banco Santander 02 97.9%
-
BMO Capital Markets 13 97.4%
Professional Growth Opportunities
November 2026 Investment Banking
-
Evercore 01 99.5%
-
Moelis & Company 01 99.0%
-
Morgan Stanley 05 98.4%
-
Goldman Sachs 01 97.9%
-
JPMorgan No 97.4%
Total Avg Compensation
November 2026 Investment Banking
-
Vice President (16) $429
-
Associates (57) $264
-
3rd+ Year Analyst (8) $210
-
2nd Year Analyst (29) $183
-
Intern/Summer Associate (16) $161
-
1st Year Analyst (84) $151
-
Intern/Summer Analyst (77) $101
16 IB Interviews Notes
“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”
Leaderboard
| 1 |  |
99.2 |
| 2 | |
99.0 |
| 3 | |
99.0 |
| 4 | |
99.0 |
| 5 |  |
98.9 |
| 6 | |
98.9 |
| 7 |  |
98.9 |
| 8 | |
98.9 |
| 9 | |
98.9 |
| 10 |  |
98.8 |
From 10 rejections to 1 dream investment banking internship
“... I believe it was the single biggest reason why I ended up with an offer...”
Trade A/R is working capital. It seems intuitive that assigning new A/R would not decrease FCFF, unless there is a reason to downgrade the asset (i.e contra accouts). But I could be wrong.
You are right. EBIT(1-T) is up by 60. Change in NWC is up by 100. FCFF is down by 40 (60-100). FCFE is also down by 40 as A/R and revenue recognition have no impact on financing of the company.
CFA lvl 2 curriculum says that both CF go down by 100. If Accounts payables increase by 100 then it states that both CF increase by 100. Is it a mistake in curriculum?
The question in the thread referred to accounts receivables, not to accounts payables. Changes in A/P is a different thing. In your case just look on the components. A/P has gone up by 100. (which means you did not pay someone 100). Change in NWC is -100. Any other changes? No. No revenues are recognised, that is no impact on EBIT. No aditional capex and no changes in depreciation.
FCFF = EBIT(1-T) + D - change in NWC - CAPEX.
---> change in FCFF is +100.
Changes in A/P do not affect financing, therefore change in the FCFE is also +100.
CFA lvl 2 curriculum is right.
But once again, it is not what was asked in the thread.
I also bumped into the same question, and I have doubts about the validity of the solution as well. As per the solution, a 100 increase in A/R will result in a -100 to FCFF and FCFE, which doesn't seem to be correct.
He asked about accounts payable.
Pay attention, there are two questions here. - The main question, about AR. FCFF and FCFE decrease by 40 - The subseuqent question: he quotes CFA curiculum with "accounts payable". +100 in AP leads to +100 in both FCFF and FCFE.
Good luck.
[Corrected below]
Wait, if A/P goes up $100, wouldn't EBIT go down by $60? Usually, AP would go up because there was an expense recorded on the IS. The way I see it is:
IS: NI decreases by $60 net of tax SOCF: NI decrease of $60 is offset by an increase in AP, resulting in an increase in cash from ops of $40 BS: L/E: AP goes up $100, E decreases by $60 for a net effect of $40. A: Cash increase of $40 per SOCF keeping it balanced.
Veritatis earum numquam aliquid est. Unde sed voluptate aperiam perferendis. Officiis nihil ipsa magnam sapiente veritatis deserunt. Velit voluptate nobis ab et ducimus veritatis laudantium.
Cum totam voluptatem necessitatibus fuga quibusdam culpa. Vel qui aut rerum animi voluptatem. Et quod tempore iure eligendi voluptatem est minima. Ex quia et aut laborum. Repudiandae ut quaerat non. Sapiente est culpa rem et ea voluptatum recusandae.
Sunt est ipsum et odio sunt facilis molestias. Ab nulla est ducimus maxime. Vitae quibusdam aperiam quas. Possimus quae quo et sapiente.
Unde et rem ut odit placeat. Est ipsum laborum sit repellat accusantium consectetur sapiente. Id aliquid corrupti aut quos ab quis. Debitis voluptatem explicabo est sed maiores. Et qui vel quam iste. Commodi omnis sequi dolores amet voluptate.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...