Customers of Jerry's Equipment Manufacturing Unit who buy equipment on credit and then delay making payments will receive a bill from Bonneville, a collection agency. What relationship does Bonneville have with Jerry's?
A) Trade credit
B) Revolving credit agreement
C) Factoring
D) Shortterm bank loans

Question

Customers of Jerry's Equipment Manufacturing Unit who buy equipment on credit and then delay making payments will receive a bill from Bonneville, a collection agency. What relationship does Bonneville have with Jerry's?
A) Trade credit
B) Revolving credit agreement
C) Factoring
D) Short­term bank loans

Quizplus · Accepted Answer

Bonneville is a collection agency, indicating that they are likely involved in factoring. Factoring is a financial arrangement in which a business sells its accounts receivable (i.e., unpaid invoices) to a third-party company at a discount. The third-party company, in this case Bonneville, then takes on the responsibility of attempting to collect on those unpaid invoices from the original customers.

Customers of Jerry's Equipment Manufacturing Unit Who Buy Equipment on Credit