Receivables might be sold ("factored")to:
A)lengthen the time to collect from customers.
B)reduce the receivables turnover ratio.
C)generate cash quickly.
D)generate a gain on sale.

Question

Quizplus · Accepted Answer

Selling (factoring) receivables generates cash quickly, which can be useful for a company that needs immediate funds. Lengthening the time to collect from customers (A) or reducing the receivables turnover ratio (B) are not the goals of factoring receivables. While factoring receivables may generate a gain on sale (D), this is not the primary reason why companies choose to factor their receivables.

Receivables Might Be Sold ("Factored")to