Consider an exporter that sells its accounts receivables off to another firm that becomes responsible for obtaining cash from the various importers. This reflects:

Question

Quizplus · Accepted Answer

This scenario reflects factoring, which is the practice of a business selling its accounts receivable to a third party, the factor, in exchange for immediate cash. The factor then assumes responsibility for collecting on the receivables from the importers. Accounts receivable financing (A) is generally a loan secured by the accounts receivable, while consignment (B) involves the exporter sending goods to a foreign agent who sells them on behalf of the exporter and pays the exporter after the goods are sold. A letter of credit (D) is a payment mechanism used in international trade that guarantees payment to the exporter upon delivery of the goods to the importer.

Consider an Exporter That Sells Its Accounts Receivables Off to Another