When Silver Fitness Sells Its Accounts Receivable to a Financial

question 49

Multiple Choice

When Silver 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 Silver 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:

Asset Account

An account that records the value of assets owned by a company, such as cash, inventory, and equipment.

Financial Statement

A record that details the financial activities and conditions of a business or individual, commonly including the balance sheet, income statement, and cash flow statement.

Financial Statement

Formal records of the financial activities and position of a business, individual, or other entity, typically including the income statement, balance sheet, and statement of cash flows.

Normal Balance

The side (debit or credit) where increases are recorded for a particular type of account, reflecting the account's normal balance position in the accounting equation.