Asked by Cameryn Stewart on Jul 29, 2024
Verified
Explain the options a company may use to convert its receivables to cash before they are due.
Convert Receivables
The process of transforming accounts receivable (money owed to a company by its customers) into cash.
Before Due
Refers to actions or events occurring prior to a specified deadline or due date.
Cash Options
Financial derivatives that give the buyer the right, but not the obligation, to buy or sell a stock at a specified price before a certain date.
- Describe the methods used to convert receivables to cash before maturity and discuss their accounting implications.
Verified Answer
SP
sergio perezJul 31, 2024
Final Answer :
A company's receivables are normally converted to cash as the customers pay off their accounts.However,options are available to a company that wishes to convert its receivables before they are due.A company can sell the receivables to a factor,paying a fee for the service,or the company can pledge its receivables as security for a loan.
Learning Objectives
- Describe the methods used to convert receivables to cash before maturity and discuss their accounting implications.
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