PRC-3 · Chapter 4 · Question 54 of 65
A manufacturer is owed Rs. 2 million by its clients but needs cash immediately to pay taxes. A financial institution buys these outstanding invoices for Rs. 1.85 million cash today. What short-term financing method is this?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Discounting / Factoring of receivables
Explanation
Factoring or discounting involves selling accounts receivable (unpaid customer invoices) to a third party at a discount to secure immediate liquidity.
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