A firm needs spare cash because during economic downturns, sales may fall below expectations while outflows could prove higher than was budgeted.Firms sell their accounts receivable at a discount for the purpose of:

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Selling accounts receivable at a discount is a common practice used to obtain short-term financing. This is known as factoring, where a firm sells its accounts receivable to a third party (factor) at a discount in exchange for immediate cash. This provides a firm with the necessary cash to cover any short-term cash shortages, which is crucial during times of economic downturns when sales may fall below expectations. Therefore, the correct answer choice is D.

A Firm Needs Spare Cash Because During Economic Downturns, Sales