Firms That Are Temporarily Short of Cash and Unable to Borrow

question 1

Multiple Choice

Firms that are temporarily short of cash and unable to borrow from usual sources can convert accounts receivable into cash by selling accounts receivable to a bank or financing company.This is called

• A)assigning accounts receivable.
• B)pledging accounts receivable.
• C)factoring accounts receivable.
• D)transferring accounts receivable.
• E)none of the above.

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Definitions:

Short Position

A trading strategy where an investor sells a security they do not own, speculating that its price will decline, allowing them to buy it back at a lower price for a profit.

Profit

The financial gain realized when the amount earned from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.

Financial Futures Contracts

Agreements to buy or sell a financial instrument at a future date for a price agreed upon today.

DAX 30 Index

A stock market index that represents 30 of the largest and most liquid German companies trading on the Frankfurt Stock Exchange.