When a firm uses its accounts receivable as collateral, or security, to obtain a short-term loan, as from a commercial bank, it is called
A) pledging accounts payable.
B) factoring accounts receivable.
C) factoring accounts payable.
D) pledging accounts receivable.
E) commercial financing.

Question

Quizplus · Accepted Answer

Pledging accounts receivable involves using the receivables as collateral for a loan, without selling them. This is different from factoring, where receivables are sold to a third party.

When a Firm Uses Its Accounts Receivable as Collateral, or Security