BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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It is a type of debtor finance in which a business sells its accounts receivable .
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The receivables are sold to the third party (called a factor) at a discount.
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It is commonly referred to as accounts receivable factoring, invoice factoring.
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All of the Above
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Detailed explanation-1: -Which of the following clearly defines the Factoring business? It is a type of debtor finance in which a business sells its accounts receivable . The receivables are sold to the third party (called a factor) at a discount. It is commonly referred to as accounts receivable factoring, invoice factoring.
Detailed explanation-2: -Primarily, there are two types of factoring, recourse factoring and non-recourse factoring.
Detailed explanation-3: -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-4: -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-5: -Answer: (1) Factoring is commonly identified as accounts receivable factoring, invoice factoring, and sometimes accounts receivable financing. The maximum debt period permitted under factoring is 150 days.