Assume a Company Has Been Maintaining a Receivables Factoring Program

question 7

Multiple Choice

Assume a company has been maintaining a receivables factoring program for the past five years and has been experiencing the same level of sales, factoring, and bad debts over that period. Customers typically pay their receivables within 60 days. Which of the following is true with respect to the current period (all else equal) ?

• A) The accounts receivable balance will decrease.
• B) Cash flow from operations is stable.
• C) Net income is likely to decline.
• D) Accounts receivable payable within 60 days cannot be factored.

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Definitions:

Intransigence

The refusal to change one's views or to agree about something, often leading to deadlock in negotiations or discussions.

Distributive Bargaining

A negotiation strategy focused on dividing a fixed amount of resources, often resulting in a win-lose scenario.

Superordinate Goals

Objectives that are prioritized above individual goals, often used to unite conflicting parties towards a common cause.

Common Objectives

Goals or aims shared by a group of people or different entities that guide their collaborative efforts.