Pledging accounts receivable:
A)is similar to factoring in that the receivables no longer belong to the borrowing firm.
B)may involve recourse which means that the borrower is responsible for losses from uncollectible accounts.
C)always requires the lender to review each account individually and determine which ones are creditworthy before agreeing to a loan.
D)is a relatively inexpensive form of financing.
E)All of the above are correct regarding pledging accounts receivable.

Question

Quizplus · Accepted Answer

Pledging accounts receivable may involve recourse, which means that the borrower is responsible for losses from uncollectible accounts. This distinguishes it from factoring, where the factor assumes the risk of nonpayment. The other statements are incorrect.

Pledging Accounts Receivable