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:

Risk-Free Asset

An investment with a certain return and no risk of financial loss, typically represented by government securities.

Risk Level

The degree of uncertainty and/or potential financial loss inherent in an investment decision.

Treasury Bills

Short-term government securities issued at a discount from face value and mature in a year or less, representing a safe and liquid investment option.

Risky Stock

A stock that carries a high level of volatility and uncertain returns, often associated with companies in emerging or highly competitive sectors.