In Deciding Whether Financing with Receivables Is a Secured Borrowing

question 137

Multiple Choice

In deciding whether financing with receivables is a secured borrowing or a sale under U.S. GAAP, the critical element is the extent to which:

• A) The transferee has received substantially all the risks and rewards of ownership.
• B) The age of the receivables transferred differs from the average age of the receivables.
• C) The transferor of the receivable surrenders control over the assets transferred.
• D) The transferee relies on funds from the transferor to maintain operations.

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Definitions:

Wage Bill

the total amount of money paid by employers to their employees for work performed, typically within a specific period.

Wage Rate

The standard amount of compensation individuals receive in exchange for performing work or services, typically expressed per hour or year.

Profit-Maximizing Number

The output level at which a business achieves the highest possible profit, determined by analyzing costs and revenue functions.

Profit-Maximizing Firm

A business entity that seeks to achieve the highest possible profits through its operations and strategies.