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:

Neo-Nazis

Groups or individuals that seek to revive and promote ideologies associated with Nazism, including racism, anti-Semitism, and the glorification of Adolf Hitler.

Social Control

Mechanisms, strategies, and institutions used by a society to regulate individual behavior and maintain social order.

Power

A person or group’s ability to exercise influence and control over others.

Deviance

Actions or behaviors that violate societal norms or rules, which can result in social disapproval or sanctions.