'Factoring' Is One Method of Using Accounts Receivable as Security

question 33

Multiple Choice

'Factoring' is one method of using accounts receivable as security over a loan.This occurs when:

• A) a financial institution loans cash to an entity by acquiring 70 - 75% of an entity's accounts receivable.
• B) a financial institution loans cash to an entity with the entity guaranteeing the money it receives from specific debtors will be used to repay the loan.
• C) a financial institution loans cash to an entity by 'buying' the accounts receivable and obtaining the right to collect the accounts directly from the entity's debtors.
• D) None of these options is correct.

---

Definitions:

Standard Normal Distribution

A bell-shaped distribution with a mean of zero and a standard deviation of one, used as a reference in statistical analysis.

Normal Distribution

A bell-shaped distribution where data is symmetrically distributed around the mean, with most values clustering around a central region.

Normally Distributed

A balanced distribution of probability about the mean, showing a higher occurrence rate for data near the mean compared to data far away.

Standard Normal Distribution

A probability distribution that has a mean of zero and a standard deviation of one, used in hypothesis testing and other statistical analyses.