Final answer:
Factoring is a financial transaction where a business sells its accounts receivable to a third party at a discount for immediate cash flow.
Step-by-step explanation:
A. Factoring is a method of borrowing against receivables. When a business uses factoring, it sells its accounts receivable (invoices) to a third party (the factor) at a discount. This provides the business with immediate cash flow. The factor then collects payments directly from the customers. This financial transaction is a form of debtor finance where a business sells its invoices to a third party at a discount for immediate cash flow, which can be crucial for maintaining the liquidity of the business.