Question

Factoring accounts receivable is the sale of a firm's receivables while pledging accounts receivable is the...

Factoring accounts receivable is the sale of a firm's receivables while pledging accounts receivable is the use of accounts receivable as collateral for a loan.

a.

True

 b.

False
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Answer #1

TRUE

Factoring accounts receivable is the sale of a firm's receivables. In factoring, a firm sells its receivables to another firm or company or bank, known as factor. The factor then discounts those receivables at certain percentage which is his commission, and remit the remaining / balance amount.

Pledging accounts receivable is the use of accounts receivable as collateral for a loan. A firm can pledge its accounts receivable as collateral and obtain a secured loan.

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