Question

Kliting Co. has a lot of outstanding accounts receivable but customers are slow to pay, and it doesn't have sufficient cash to pay its suppliers and employees at the end of the month. Instead of borrowing money, Kliting decides to sell its accounts receivable. This form of financing is known as: Group of answer choices

Answer 1

Factoring

Step-by-step explanation:

Factoring is a form of debtor finance that involves an entity selling it's accounts receivables to a third party at a discount.

The third party is called a factor.

This practice is usually carried out to meet urgent cash needs of the business.

In this instance Kliting Co. has a lot of outstanding accounts receivables and there is need for cash to pay its suppliers and employees at the end of the month.

Instead of borrowing Kliting Co. sells their accounts receivables to get the needed cash.

This is factoring finance