BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Purchase and collection of debts
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Sales ledger management
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Provision of specialised services related to credit investigation
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All of the above
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Detailed explanation-1: -Factoring involves three parties-a factor, a client, and a debtor. The factor is the financial institution that offers finance to a client (in exchange for receivables). The client is the firm that sells its receivables; the debtor is the party who owes the trade debt.
Detailed explanation-2: -Definition: Factoring is a type of finance in which a business would sell its accounts receivable (invoices) to a third party to meet its short-term liquidity needs. Under the transaction between both parties, the factor would pay the amount due on the invoices minus its commission or fees.
Detailed explanation-3: -Solution(By Examveda Team) Factoring is a form of receivables financing. Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount.
Detailed explanation-4: -There are three parties directly involved: the factor who purchases the receivable, the one who sells the receivable, and the debtor who has a financial liability that requires him or her to make a payment to the owner of the invoice.