When a firm sells its accounts receivables to a financial institution,it is called:
A) captive financing.
B) collateralization.
C) securitization.
D) legalization.
E) None of these.

Question

Quizplus · Accepted Answer

Selling accounts receivables to a financial institution is known as securitization. This means that the financial institution will purchase the accounts receivables at a discounted rate and collect payment from the customers directly, allowing the firm to receive immediate cash flow. "Captive financing" refers to a situation where a company finances its own products or services, "collateralization" refers to securing a loan with collateral such as assets or property, and "legalization" is not relevant to this context.

When a Firm Sells Its Accounts Receivables to a Financial