Firms that are temporarily short of cash and unable to borrow from usual sources can convert accounts receivable into cash by
A)assigning accounts receivable and forwarding amounts collected to the lending institution.
B)pledging its accounts receivable to the lending agency as collateral for a loan.
C)factoring the accounts receivable to a bank or financing company to obtain cash.
D)all of the above.
E)none of the above.

Question

Quizplus · Accepted Answer

All the options provided (A, B, C) are legitimate ways for firms to convert accounts receivable into cash when they are temporarily short of cash and unable to borrow from usual sources. Assigning accounts receivable involves forwarding amounts collected to the lending institution, pledging accounts receivable as collateral involves securing a loan with the receivables, and factoring involves selling the receivables to a third party (a bank or financing company) for immediate cash.

Firms That Are Temporarily Short of Cash and Unable to Borrow