Which One of the Following Is Least Likely to Be

question 17

Multiple Choice

Which one 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 a reduced sales price.
• D)Factoring may be the cheapest method of avoiding a cash flow problem.

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Definitions:

Stock Options

Financial derivatives that give the holder the right, but not the obligation, to buy or sell shares of a company at a specified price within a set time frame.

Granting Stock

The process by which a company offers shares of its stock to employees as part of their compensation package or as a reward.

Exercise Option

The act of implementing the right to buy or sell an asset under the terms of an option contract.

Purchase

The act of buying goods, services, or assets.