Accounts receivable may be used as a source of financing by:
A) collecting the receivables.
B) writing off the receivables as bad debt expense.
C) buying securities backed by the receivables.
D) factoring the receivables to a finance company.

Question

Quizplus · Accepted Answer

Factoring the receivables to a finance company involves selling the receivables at a discount to the finance company, who then collects the full amount from the customers. This provides immediate cash to the company, which can be used for financing purposes. Collecting the receivables or writing off the receivables would not provide financing, and buying securities backed by the receivables is not a common practice.

Accounts Receivable May Be Used as a Source of Financing