Asked by Queen Nahnuh on May 22, 2024
Verified
Which of the following is a source of cash, all else the same?
A) Retiring commercial paper.
B) Reducing accounts payable.
C) Factoring accounts receivable.
D) Selling inventory on credit.
E) Purchasing goods from a supplier.
Factoring Accounts Receivable
A financial transaction where a business sells its accounts receivable to a third party at a discount to immediately raise cash.
Commercial Paper
An unsecured, short-term debt instrument used by corporations to finance their immediate needs.
Accounts Payable
Obligations or debts that a company owes to its suppliers or creditors for goods or services received that have not yet been paid for.
- Understand the use of factoring as a strategy for managing cash flow.
Verified Answer
SS
Shobha SinghMay 25, 2024
Final Answer :
C
Explanation :
Factoring accounts receivable is a source of cash because it involves selling your receivables to a factor (a third party) at a discount, in exchange for immediate cash. This process provides the company with immediate liquidity.
Learning Objectives
- Understand the use of factoring as a strategy for managing cash flow.