When Platinum Fitness sells its accounts receivable to a financial institution, it receives less than the full value of the accounts receivable.Which of the following is a benefit Platinum Fitness receives from this arrangement?
A) It will receive the money in one month instead of two months.
B) It will have more inventory than its competitors.
C) This will allow closer relationships with its customers.
D) The cash will be received right away.
E) Platinum will be responsible for collecting the accounts.

Question

Quizplus · Accepted Answer

By selling its accounts receivable to a financial institution, Platinum Fitness receives cash right away instead of waiting for customers to pay their bills. This provides the company with immediate cash flow, which can be used to pay bills, invest in new projects, or improve operations.

When Platinum Fitness Sells Its Accounts Receivable to a Financial