Question

An arrangement in which a firm sells its accounts receivable at a discount to a factor, an entity that specializes in collections is __________

Answer 1

Factoring or accounts receivable financing is where a business sells its accounts receivable to a factor at a discount to get immediate cash flow.

Step-by-step explanation:

An arrangement in which a firm sells its accounts receivable at a discount to a factor, an entity that specializes in collections is known as factoring or accounts receivable financing. This is a financial transaction where a business sells its invoices to a third party, called a factor, at a lower value than their face value. The factor then takes on the responsibility of collecting the payments from the business's customers. This allows businesses to get immediate cash flow instead of waiting for payments from their customers. It's a common practice among companies to manage their cash flow and working capital requirements.