The Sale of Receivables by a Business

question 171

Multiple Choice

The sale of receivables by a business

• A) indicates that the business is in financial difficulty.
• B) is generally the major revenue item on its income statement.
• C) is an indication that the business is owned by a factor.
• D) can be a quick way to generate cash for operating needs.

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Definitions:

Materials Needed

The raw goods and components required for the manufacturing or production of products.

Cash Budget

A financial plan that estimates cash inflows and outflows over a specific period, often used for managing liquidity and ensuring financial stability.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, reflecting the decrease in value over time.

Cash Receipts

The collection of money, typically from sales or services, recorded in the financial accounting records.