Selling accounts receivable to obtain short-term funds is called:
A)factoring.
B)debt financing.
C)pledging.
D)equity financing.

Question

Quizplus · Accepted Answer

Factoring is the process of selling accounts receivable to a third party (a factor) in exchange for immediate cash. This is an effective way for businesses to obtain short-term funds without taking out loans or incurring debt. The factor buys the receivables at a discount, and then assumes the responsibility of collecting payment from the customers. This allows the business to access the money owed to them more quickly and efficiently than waiting for payment on invoices. Debt financing involves borrowing money and promising to repay it with interest, pledging involves using an asset as collateral for a loan, and equity financing involves selling ownership in the business.

Selling Accounts Receivable to Obtain Short-Term Funds Is Called