PRC-3 · Chapter 4 · Question 40 of 65
A manufacturer has Rs. 5 million in outstanding customer invoices but needs cash today to pay suppliers. A bank agrees to buy these invoices for Rs. 4.7 million in immediate cash. What is this financing method?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Factoring / Discounting of receivables
Explanation
Factoring or discounting involves outright selling accounts receivable to a financial institution at a discount to obtain quick access to funds.
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