Final answer:
A company can transfer a receivable through the sale with or without recourse or secured borrowing transactions. Each method offers different levels of risk and liability for the company. This is part of broader financial strategies including issuing stock, borrowing from banks, or issuing bonds.
Step-by-step explanation:
A company in need of immediate cash can transfer a receivable to a finance company by using one or more of the following methods: a) sale of receivable with recourse, b) sale of receivables without recourse, and c) secured borrowing transactions. When a company sells receivables with recourse, it retains some liability if the receivable fails to collect. If they sell without recourse, there is no further liability on the part of the seller. Secured borrowing is an arrangement where the receivables are used as collateral for a loan, but the company retains ownership of the receivables and the risk associated with them.
These methods are choices a firm has alongside other financing options like borrowing from banks, issuing bonds, or selling stock. Borrowing from banks or issuing bonds, while helping to maintain control of the company, can burden the firm with interest payments regardless of their income status. On the other hand, selling stock equates to selling company ownership to the public, which necessitates answering to a board of directors and other shareholders.