Which of these is an entity who will buy accounts receivable before they are due on a discounted basis, with the spread between the discounted price and the receivable's face value providing them with the expected compensation for both the time value of money and for the expected level of defaults amongst the accounts receivable?
A) commercial bank
B) factor
C) receiver
D) blanket loaner

Question

Quizplus · Accepted Answer

Factors are entities that buy accounts receivable before they are due on a discounted basis. The spread between the discounted price and the receivable's face value provides them with the expected compensation for both the time value of money and for the expected level of defaults amongst the accounts receivable. Commercial banks may also offer factoring services, but they are not the only entities that offer factoring services. Receivers are individuals appointed to take possession of and manage assets in a bankruptcy or insolvency proceeding, and blanket loaner is not a commonly used financial term.

Which of These Is an Entity Who Will Buy Accounts