Factoring accounts receivable has all of the following characteristics except:

Question

Quizplus · Accepted Answer

Factoring and pledging are two different financing methods. Factoring involves selling the receivables to a third-party (factor) at a discount, while pledging involves using the receivables as collateral for a loan. Factoring does not involve removing the balances from the balance sheet, but rather transferring the responsibility for collecting payment to the factor. Therefore, all of the characteristics listed in the options are actually characteristics of pledging, not factoring.

Factoring Accounts Receivable Has All of the Following Characteristics Except