PRC-3 · Chapter 4 · Question 7 of 65
A textile firm has Rs. 1 million in unpaid customer invoices but needs cash immediately to pay salaries. The firm sells these invoices to a financial institution at a discount. What is this financing method called?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Factoring
Explanation
Factoring is a short-term finance method where a business sells its accounts receivable (invoices) to a third party at a discount to obtain immediate cash.
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