Question

Which of the following statements is FALSE? ns O A. Businesses can also obtain short-term financing by using secured loans, which are loans collateralized with short-term assets-most typically the firm's accounts receivables or inventory O B. In a factoring of accounts receivable arrangement, the firm sells receivables to the lender (i.e., the factor), and the lender agrees to pay the firm the amount due from its customers at the end of the firm's payment period. O c. If a factoring arrangement is with recourse, the factor will pay the firm the amount due regardless of whether the factor receives payment from the firm's customers. OD. Both the interest rate and the factor's fee vary depending on such issues as the size of the borrowing firm and the dollar volume of its receivables.

Answer 1

Option C

Option A is true because short-term financing can be obtained by getting short-term loans secured by current assets. Option B is correct because factoring accounts receivable represents encashing the receivables for immediate cash. Option D is true since the factor fee will depend upon the risk undertaken depending on the credibility of the receivables and the amount involved.

Option C is false because in case of factoring with recourse, the risk stays with the client.