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Why would a business factor its accounts receivables? A - HSC - SSCE Business Studies - Question 13 - 2017 - Paper 1
Question 13
Why would a business factor its accounts receivables? A. To improve cash flow B. To increase owner’s equity C. To increase the value of current assets D. To improve ... show full transcript
Worked Solution & Example Answer:Why would a business factor its accounts receivables? A - HSC - SSCE Business Studies - Question 13 - 2017 - Paper 1
Step 1
Why would a business factor its accounts receivables?
Answer
A business would factor its accounts receivables primarily to improve cash flow. Factoring allows a business to convert its receivables into immediate cash rather than waiting for customers to pay their invoices. This is particularly beneficial for maintaining operational liquidity, managing expenses, and seizing new opportunities. It reduces the payment collection time and enhances the overall cash management strategy.