The primary advantage that pledging accounts receivable provides is
A) the flexibility it gives to the borrower.
B) that the financial institution bears the risk of collection.
C) the low cost as compared with other sources of short-term financing.
D) that the financial institution services the accounts.

Question

Quizplus · Accepted Answer

Pledging accounts receivable provides flexibility to the borrower because they can obtain short-term financing without selling their assets or equity. This allows them to use their accounts receivable as collateral and maintain ownership and control of their business. However, the financial institution does not bear the risk of collection, and the cost of pledging accounts receivable may not always be the lowest compared to other sources of short-term financing. Additionally, the borrower is responsible for servicing the accounts.

The Primary Advantage That Pledging Accounts Receivable Provides Is