A Firm May Factor Its Accounts Receivable to a Bank

question 95

Multiple Choice

A firm may factor its accounts receivable to a bank or other financial institution in exchange for cash. Which of the following is/are not true?

• A)The lender physically controls the receivables and collects cash from customers.
• B)Accounts receivable that the firm has factored do not appear on the balance sheet.
• C)The firm has sold the accounts receivable.
• D)The firm should disclose the factoring arrangement in its financial reports.
• E)None of the above.

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Definitions:

Lower Ranks

Positions at the bottom or near the bottom of an organizational or hierarchical structure, often with fewer responsibilities and authority.

Non-Exempt Levels

Employment positions not covered by the Fair Labor Standards Act's overtime provisions, typically paid hourly.

Merit Pay Plans

Compensation strategies that base employee pay on performance, offering financial rewards for meeting or exceeding predetermined criteria.

Human Resources

The department of a business or organization that deals with hiring, administration, and training of personnel.