When Platinum Fitness Sells Its Accounts Receivable to a Financial

question 125

Multiple Choice

When Platinum Fitness sells its accounts receivable to a financial institution, it receives less than the full value of the accounts receivable. Which of the following is a benefit Platinum Fitness receives from this arrangement?

• A) It will receive the money in one month instead of two months.
• B) It will have more inventory than its competitors.
• C) This will allow closer relationships with its customers.
• D) The time and expense of collecting accounts shifts to the factor.
• E) Platinum will be responsible for collecting the accounts.

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Definitions:

Base Period

A specific time period against which economic or financial data is compared or analyzed.

Analysis Period

The specific span of time over which financial performance is evaluated or investment decisions are analyzed.

Trend Analysis

The practice of collecting information and attempting to spot a pattern, often used in technical analysis of financial markets or to analyze business data over time.

Economically Important Relationships

Linkages or interactions between economic entities or factors that significantly influence outcomes such as growth, inflation, or market dynamics.