Question

When a business factors its accounts receivables, this means that the business ________. A) uses the...

When a business factors its accounts receivables, this means that the business ________.

A) uses the receivables as security for a loan

B) no longer has to deal with the collection of the receivables from the customers

C) receives the total amount of the receivables from the factor

D) receives cash, less an applicable fee, after the factor collects from the customers

The credit department must have access to cash so that they can exercise effective internal control over receivables.      TRUE                  FALSE       

Homework Answers

Answer #1

1) When a business factors its accounts receivables, this means that the business :

B) no longer has to deal with the collection of the receivables from the customers.

Now the Factor has the legal rights to collect the amount from the accounts Receivable at the time of maturity. The factor earns discount from this arrangement and the business gets immediate cash.

2) The credit department must have access to cash so that they can exercise effective internal control over receivables.

False

Credit department make decisions concerning credit limits, acceptable levels of risk and terms of payment to their customers. They do not require any access to cash to exercise effective internal control over receivables.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1. Taxes receivable is classified as: a.notes receivable. b.trade receivables. c.accounts receivable. d.other receivable. 2. A...
1. Taxes receivable is classified as: a.notes receivable. b.trade receivables. c.accounts receivable. d.other receivable. 2. A transaction in which a company sells its receivables and immediately receives cash for operating and other needs is called _____. a.factoring b.discounting c.adjusting d.assigning 3. Jack Inc. offers a credit term of n/30. This means that the company: a.offers a 30-day loan to the suppliers. b.expects to collect receivables every 30 days. c.pays its creditors within 30 days of the purchase of raw materials....
Slide 30-13 Lonergan Company occasionally uses its accounts receivable to obtain immediate cash. At the end...
Slide 30-13 Lonergan Company occasionally uses its accounts receivable to obtain immediate cash. At the end of June 2018, the company had accounts receivable of $1,060,000. Lonergan needs approximately $640,000 to capitalize on a unique investment opportunity. On July 1, 2018, a local bank offers Lonegan the following two alternatives: Borrow $640,000, sign a note payable, and assign the entire receivable balance as collateral. At the end of each month, a remittance will be made to the bank that equals...
Lonergan Company occasionally uses its accounts receivable to obtain immediate cash. At the end of June...
Lonergan Company occasionally uses its accounts receivable to obtain immediate cash. At the end of June 2021, the company had accounts receivable of $900,000. Lonergan needs approximately $560,000 to capitalize on a unique investment opportunity. On July 1, 2021, a local bank offers Lonergan the following two alternatives: Borrow $560,000, sign a note payable, and assign the entire receivable balance as collateral. At the end of each month, a remittance will be made to the bank that equals the amount...
Joe owns a small company that is experiencing cash flow problems. Although his competitors require payment...
Joe owns a small company that is experiencing cash flow problems. Although his competitors require payment for services within 30 days, Joe provides his customers up to 90 days with no interest. Joe works with reputable companies, provides top-quality services, and rarely encounters dissatisfied customers. His annual revenue this year will be about $1,500,000 and he expects a net income of $110,000 this year. The long collection period appears to have created the cash flow problem. The business has a...
Analyzing the effects of Business Transactions: On March 1, Suresh starts software development center for developing...
Analyzing the effects of Business Transactions: On March 1, Suresh starts software development center for developing customer-specific computer software. The transactions for the said month are as follows: 1) Investment by owner : On March 1, Suresh invests Rs 50,000/- in cash in the company. 2) Receipt of loan : On March 2, Suresh took a loan of Rs 20,000/- from Manoj for the company. 3) Purchase of assets on credit : On March 3, Suresh purchased 2 computers with...
2.1 When evaluating the debt tolerance of your practice, which of the following factors does not...
2.1 When evaluating the debt tolerance of your practice, which of the following factors does not need to be considered? A) The claiming system you have put in place and how long claims will take to process B) Your own attitude towards risk and debt tolerance C) Your patient billing methods D) Your patient population and their ability to pay 2.2 What would be the best strategy to implement to reduce the likelihood of client debt within your practice? A)...
Which of the following is a disadvantage when a business accepts credit cards or debit cards...
Which of the following is a disadvantage when a business accepts credit cards or debit cards from customers? The business checks customers' credit ratings. The business pays a processing fee. The business bears the risk of nonpayment by the customer. The business bears the responsibility of collecting cash from the customer. Flag this Question Question 41 2 pts The maturity value of a note is the ________. face amount of the note principal amount times the interest rate principal amount...
1. The company uses Goldman Sachs for its investment banker and Peter Fields, a Goldman Sachs...
1. The company uses Goldman Sachs for its investment banker and Peter Fields, a Goldman Sachs managing director, has suggested that McCormick consider on of two choices for financing. There is an innovative hedge fund group that will loan $350 million to Mc Cormick for 10 years in a zero interest bond. At the end, McCormick will owe $550 million. The fee to Goldman will be paid by the hedge fund.   Use the PV function to calculate the present value...
Everybody knows that email is important, but should each company develop, own, support, and maintain its...
Everybody knows that email is important, but should each company develop, own, support, and maintain its own email infrastructure, or should it instead use lower-cost or free services? That is the question that Michael Jagger, CEO of Provident Security, faced as he contemplated a costly upgrade of the company's internal email infrastructure. Founded in 1996 by Michael Jagger as a way to pay his undergraduate tuition, Provident (www. providentsecurity.ca) started out as a company that provided special event security. Today,...
SNM Sdn Bhd received its bank statement for the month of March 2020 from BCB Bank....
SNM Sdn Bhd received its bank statement for the month of March 2020 from BCB Bank. The bank statement shows a balance of RM520,200 while SNM Sdn Bhd cash book balance shows a balance of RM512,750 on 31 March 2020. A comparison of the bank statement with the cash book reveals the following information. Cheque number 1444 for RM2,000 and cheque number 1501 for RM2,900 are still outstanding on the 31 March 2020. The bank statement indicates that BCB Bank...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT