In which scenario can firms achieve their objective by developing a relationship with a firm that offers factoring services?
A) The firm has established a source of long-term financing that avoids fees and commissions.
B) The firm plans to issue large sums of commercial paper in the near future.
C) The firm has larger than necessary cash balances and wants to find a safe way to invest the excess cash.
D) The firm relies heavily on credit sales and wants to speed up the receipt of cash.

Question

Quizplus · Accepted Answer

Factoring services can help a firm that relies heavily on credit sales to speed up the receipt of cash by selling its accounts receivable to a factor. This way, the firm can receive immediate cash for its sales, rather than waiting for customers to pay. Factoring can also help firms avoid the risk of bad debts and the cost of collections.

In Which Scenario Can Firms Achieve Their Objective by Developing