Which of the following statements is correct?
A) In a factoring arrangement,the factor always performs three functions: (1)credit checking, (2)lending,and (3)receivables collection.
B) The pledging of accounts receivable involves a transfer of the risk associated with accounts receivable from the borrower to the lender.
C) In a factoring arrangement,the seller can select various combinations of credit checking,lending,and risk bearing the factor performs by changing provisions in the factoring agreement.
D) In a factoring agreement,the factor would not perform the credit checking and risk taking functions without performing the lending function,because the former are required before the factor can lend to the seller.
E) The financing of accounts receivable involves an agreement which is informal and non-binding,which makes it difficult for the factor to protect itself.

Question

Quizplus · Accepted Answer

In a factoring arrangement, the seller indeed has the flexibility to choose which services they want from the factor, including credit checking, lending, and risk bearing. These services can be mixed and matched based on the seller's needs and the specific terms of the factoring agreement.

Which of the Following Statements Is Correct