Asked by MARIO MURILLO on Apr 26, 2024
Verified
Which of the following is the best definition of maturity factoring?
A) A written statement by a bank that money will be paid, provided conditions specified in the letter are met.
B) Short-term financing in which the factor purchases all of a firm's receivables and forwards the proceeds to the seller as soon as they are collected.
C) The time period between the acquisition of inventory and when cash is collected from receivables.
D) Loan negotiated with banks for day-to-day operations.
E) Costs that fall with increases in the level of investment in current assets.
Maturity Factoring
Short-term financing in which the factor purchases all of a firm’s receivables and forwards the proceeds to the seller as soon as they are collected.
Short-Term Financing
Borrowing funds or obtaining financial support for a short duration, typically less than a year, to cover immediate needs.
Factor Purchases
Transactions where a company outsources services or acquires assets, typically involving a third-party, or "factor," to facilitate business operations.
- Familiarize with the notion of accounts receivable financing and its repercussions on corporate activities.
Verified Answer
TT
Taieshia TillmanApr 28, 2024
Final Answer :
B
Explanation :
Maturity factoring is a financial service where a factor (financial intermediary) buys a business's invoices and pays the seller the invoice amounts as they are collected from the debtors, minus a fee. This provides the business with immediate cash flow from sales that might otherwise take time to convert into cash due to credit terms extended to customers.
Learning Objectives
- Familiarize with the notion of accounts receivable financing and its repercussions on corporate activities.