The process of______ uses a firm's accounts receivable as collateral for a loan.
A)inventory financing
B)establishing a line of credit
C)factoring
D)revolving credit

Question

Quizplus · Accepted Answer

Factoring is the process of selling a firm's accounts receivable to a third party (a factor) in exchange for immediate cash. The factor then collects the receivables directly from customers, often assuming the risk of non-payment. This is different from inventory financing, where inventory is used as collateral, establishing a line of credit, which involves pre-approved access to funds, or revolving credit, which allows a borrower to repeatedly borrow and repay funds up to a predetermined limit.

The Process Of______ Uses a Firm's Accounts Receivable as Collateral