A Firm Sells Its Accounts Receivables to a Factor at a 1.5

question 93

Essay

A firm sells its accounts receivables to a factor at a 1.5% discount. The average collection period is 1 month. What is the implicit effective annual interest rate on the factoring arrangement? Suppose the average collection period is 1.5 months. How does this affect the implicit effective annual interest rate?

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Definitions:

Fear Appeals

A persuasion technique that involves raising alarm or concern about a potential danger to motivate specific behaviors.

Intentions

Plans or commitments to carry out an action in the future, often reflecting conscious decisions.

Informational Appeal

A communication technique that uses factual information and logical arguments to persuade or influence others' attitudes or behaviors.

Cardiovascular Exercise

Physical activity that raises the heart rate and increases blood circulation throughout the body, beneficial for heart health and endurance.