Pledging Accounts Receivable

question 187

Multiple Choice

Pledging accounts receivable:

• A)is similar to factoring in that the receivables no longer belong to the borrowing firm.
• B)may involve recourse which means that the borrower is responsible for losses from uncollectible accounts.
• C)always requires the lender to review each account individually and determine which ones are creditworthy before agreeing to a loan.
• D)is a relatively inexpensive form of financing.
• E)All of the above are correct regarding pledging accounts receivable.

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Definitions:

Capacity Utilization Rate

The percentage of a firm's total potential production capacity that is actually being utilized in the production of goods or services.

Manufacturing Firms

Companies engaged in the industrial process of converting raw materials into finished products through human labor and machinery.

Disposable Income

The disposable income households have for expenditures and savings, post-income taxation.

C + I

A formula component in macroeconomics representing total private consumption (C) plus total private investment (I).