PRC-3 · Chapter 4 · Question 29 of 65
A clothing manufacturer has Rs. 2 million tied up in unpaid invoices from retailers but desperately needs cash to pay rent. The manufacturer sells these invoices to a finance company for Rs. 1.9 million cash today. What is this called?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Factoring of receivables
Explanation
Factoring (or discounting) involves selling accounts receivable (invoices) to a third party at a discount to secure immediate liquidity.
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