Gemstone Jewelers obtains needed short-term funds by selling its accounts receivable to the Friendly Finance Company. Friendly Finance usually pays Gemstone about 80% of the value of the receivables. Gemstone Jewelers utilizes ________ as a means of raising short-term funds.

Question

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Factoring is the process of selling accounts receivable at a discount for cash. The factor assumes the risk of collecting on the accounts receivable.

Gemstone Jewelers Obtains Needed Short-Term Funds by Selling Its Accounts