Vitale Jewelers obtains needed short-term funds by selling its accounts receivable to the Friendly Finance Company.Friendly Finance usually pays Vitale about 80% of the value of the receivables.Vitale Jewelers utilizes______ as a means of raising short-term funds.

Question

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Vitale Jewelers utilizes factoring as a means of raising short-term funds. Factoring involves selling accounts receivable to a third party, such as Friendly Finance Company, at a discount in exchange for immediate funds. This allows Vitale to access the cash it needs quickly and efficiently, without having to wait for clients to pay their invoices in full. The factoring company, in turn, collects payment from the clients and retains a fee for its services.

Vitale Jewelers Obtains Needed Short-Term Funds by Selling Its Accounts