A firm that transfers its receivables in exchange for cash can
A)use its accounts receivable as collateral for a loan from a bank or other financial institution.
B)factor its accounts receivable to a bank or other financial institution in exchange for cash.
C)transfer the accounts receivable to a legally separate entity that issues debt securities to investors.
D)use all of the above.
E)use none of the above.

Question

Quizplus · Accepted Answer

All options (A, B, C) are valid methods for a firm to leverage its accounts receivable for financial gain or liquidity. These include using receivables as collateral for a loan, factoring receivables for immediate cash, and transferring them to a separate entity that issues debt securities.

A Firm That Transfers Its Receivables in Exchange for Cash