The firm may transfer the accounts receivable to a legally separate entity that issues debt securities to investors. Which of the following is/are true?
A)The firm remits to investors the cash received from customers as those cash receipts occur.
B)The firm may be obligated to make payments to investors in securities if the customers fail to make sufficient cash payments to pay the principal and interest on the debt securities.
C)The transfer is called securitization, a process that transforms an asset (accounts receivable) into securities held by investors.
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

All of the statements are true. The transfer of accounts receivable to a separate legal entity that issues debt securities to investors is called securitization. The firm participating in securitization typically remits the cash received from customers as they occur, and may be obligated to make payments to investors if customers fail to make sufficient cash payments to cover the principal and interest on the debt securities.

The Firm May Transfer the Accounts Receivable to a Legally