Question

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6. A factor charges a 2% fee plus an interest rate of 18% on all cash advanced to a transferor of A/R. Monthly sales are $200,000 and the factor advances 90% of receivables submitted after deducting the 2% fee and the interest. Credit terms are net 60 days. What is the cost to the transferor of the arrangement?

Answer 1

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Coorks institution the > foctor company who like a Bank. These are priate tohich facilitentes encashment of Accocents Receivable or Bills Receivable of before maturity. They change a particalas rate such encashment along coith a tixed fees (ie factor fees) 2 Calculation of cost of transferor factored sales & 90% ( 200.000 890%) = $180,000 Interest on Amount Total cost of actor :- fixed factor fees ephano x 22 0180.000 27.) - $3600 (t) Ionterest early encashment = $ 54.00 1QODDOX x Total cost of factor to transfersos → Hence the transferor receive ($ 17000) out of it's Accounts recevable of $9.500 $ 120,000 - The year has been all the banks Calculated Prefer 360 for 360 days only. Sina Generally a year