Asked by Queen Nahnuh on May 22, 2024

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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.
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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.