Which of the Following Is Least Likely to Be Correct

question 46

Multiple Choice

Which of the following is least likely to be correct about the factoring of receivables?

• A) The selling firm bears the risk of default.
• B) The higher the perceived quality of the receivables, the lower the discount rate.
• C) The discount is paid by the selling firm in the form of reduced sales price.
• D) Factoring may be the cheapest method of avoiding a cash flow problem.

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Definitions:

Full Costs

The total costs associated with the production of goods or services, including both fixed and variable costs.

External Costs

Costs incurred by third parties who are not directly involved in a transaction or economic activity, such as environmental pollution affecting the community.

Marginal Cost Curve

A graphical representation showing how the cost of producing one more unit of a good changes as production volume increases.

Marginal Social Cost

The total cost to society of producing one additional unit of a good or service, including both direct costs and any adverse impacts on third parties.