When a business sells its accounts receivable to a finance company, this is called
A) selling short.
B) factoring.
C) mortgaging the future.
D) pledging receivables.

Question

Quizplus · Accepted Answer

Selling accounts receivable to a finance company is known as factoring. This is a common practice where businesses sell their outstanding customer invoices to a third party, also known as a factor, in exchange for immediate cash. Factors typically keep a portion of the invoice amount as their fee for providing immediate liquidity to the business.

When a Business Sells Its Accounts Receivable to a Finance