PRC-3 · Chapter 4 · Question 18 of 65
A textile firm is experiencing a cash shortage and needs money to pay wages immediately. They sell their unpaid customer invoices to a bank at a 5% discount. What short-term financing method is this?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Discounting or Factoring of receivables
Explanation
Factoring or discounting involves selling accounts receivable to a financial institution at a discount to obtain immediate cash.
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