If a Firm Starts Selling Its Accounts Receivable to a Factor

question 41

Multiple Choice

If a firm starts selling its accounts receivable to a factor, how will the firm's cash cycle change?

• A) The firm will increase its cash cycle since it will now have to wait longer for payment.
• B) The firm will decrease its cash cycle since accounts receivable is reduced.
• C) Depending on conditions, the cash cycle could either increase or decrease.
• D) There will be no change.