Pledging accounts receivable as a source of short-term credit
A) is a type of loan secured by accounts receivable.
B) is a form of spontaneous credit.
C) involves the outright sale of accounts receivable to a financial institution.
D) is an inexpensive but risky source of short-term financing.

Question

Quizplus · Accepted Answer

Pledging accounts receivable involves using them as collateral for a loan. The lender has a security interest in the receivables, and if the borrower fails to repay the loan, the lender can take possession of the receivables. This makes it a secured loan, and therefore, the best choice is A.

Pledging Accounts Receivable as a Source of Short-Term Credit