Factoring

question 3

Multiple Choice

Factoring:

• A)is a more expensive method of financing than borrowing from a bank.
• B)places the risk of uncollected accounts receivable on the small business owner.
• C)is best used as a long-term source of capital.
• D)is a type of trade credit.

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Definitions:

Cost-plus Pricing

A pricing tactic in which the final sale price is established by applying a predetermined markup on top of the product's purchase cost.

Return on Investment

A financial ratio measuring the gain or loss generated on an investment relative to the amount of money invested.

Selling Price

The amount of money charged for a product or service, typically set to cover costs and generate profit.

Absorption Costing

This accounting technique aggregates the total manufacturing costs—direct materials, direct labor, and both variable and fixed overheads—into the calculation of a product’s price.