If a Firm Starts Selling Its Accounts Receivable to a Factor

question 41

Multiple Choice

If a firm starts selling its accounts receivable to a factor, how will the firm's cash cycle change?

• A) The firm will increase its cash cycle since it will now have to wait longer for payment.
• B) The firm will decrease its cash cycle since accounts receivable is reduced.
• C) Depending on conditions, the cash cycle could either increase or decrease.
• D) There will be no change.

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Definitions:

Fee Simple

The most extensive ownership interest in land that one can possess, without time limitation to any particular line of heirs.

Fixtures

Items that were personal property but have been attached to property in such a way that they are legally considered part of the real property.

Fee Simple

The most complete ownership in property law, giving the holder full possession and control over their property without time limitations.

Crown

A term used in legal contexts to denote authority and power of the state, or the monarch in countries with a monarchy.