Giving a third party legal rights to debts owed by the business in order to provide assurance that borrowed money will be repaid is called _____.
A) operating leases
B) factoring receivables
C) capital leases
D) pledging receivables

Question

Quizplus · Accepted Answer

Pledging receivables involves giving a third party legal rights to the debts owed by the business as collateral for borrowed money. This provides assurance to the lender that the borrowed money will be repaid even if the business defaults on the loan. Operating leases and capital leases are both types of leasing agreements, while factoring receivables involves selling accounts receivable to a third party at a discount.

Giving a Third Party Legal Rights to Debts Owed by the Business