Which of the Following Statements Is FALSE

question 17

Multiple Choice

Which of the following statements is FALSE?

• A)If a factoring arrangement is with recourse,the factor will pay the firm the amount due regardless of whether the factor receives payment from the firm's customers.
• B)In a factoring of accounts receivable arrangement,the firm sells receivables to the lender (i.e. ,the factor),and the lender agrees to pay the firm the amount due from its customers at the end of the firm's payment period.
• C)Businesses can also obtain short-term financing by using secured loans,which are loans collateralized with short-term assets-most typically the firm's accounts receivables or inventory.
• D)Both the interest rate and the factor's fee vary depending on such issues as the size of the borrowing firm and the dollar volume of its receivables.

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Definitions:

Unsecured Creditor

A creditor who lends money without obtaining specified assets as collateral, thus facing higher risk in case of borrower's bankruptcy.

Family Home

A primary residence where a family lives and conducts their daily activities.

Security Interest

A legal claim or lien on collateral that has been pledged, usually to secure repayment of a loan.

Collateral

Assets pledged by a borrower to secure a loan or credit, which can be seized by the lender if the borrower fails to repay according to the agreed terms.