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A business sells its accounts receivable to improve cash flow - HSC - SSCE Business Studies - Question 10 - 2007 - Paper 1
Question 10
A business sells its accounts receivable to improve cash flow. Which of the following best describes this strategy? (A) Factoring (B) Equity financing (C) Sale and... show full transcript
Worked Solution & Example Answer:A business sells its accounts receivable to improve cash flow - HSC - SSCE Business Studies - Question 10 - 2007 - Paper 1
Step 1
Which of the following best describes this strategy?
Answer
The sale of accounts receivable to improve cash flow is known as Factoring. This strategy involves selling outstanding invoices to a third party (a factor) at a discount in exchange for immediate cash, allowing the business to access funds quickly to meet operational needs.