PRC-3 · Chapter 4 · Question 39 of 65
A textile wholesaler severely lacks short-term funds to pay its factory workers, but it holds a large number of unpaid customer invoices. The wholesaler sells these invoices to a bank at a slight discount for immediate cash. What is this financing method?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Discounting or Factoring of receivables
Explanation
Factoring or discounting is a popular short-term finance method where a business sells its accounts receivable (invoices) to a third party to obtain immediate liquidity.
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