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In the factoring service who is concerned as a Factor?
- a)The person whose Receivables are acquired
- b)The goods or services are sold to an agency
- c)The person who acquires the receivables
- d)Both b & c
Correct answer is option 'D'. Can you explain this answer?
Verified Answer
In the factoring service who is concerned as a Factor?a)The person who...
- Factoring is a service concerned with the financing and collection of account receivables, in domestic and international trade. It is a continuous arrangement in, which goods or services are sold to an agency, known as a "factor". This arrangement is called "factoring".
- An intermediary agent who funds receivables is a factor. A factor is simply a source of financing that offers to pay the company the amount of an invoice minus a commission and fee discount. The factor immediately advances much of the sum invoiced to the client and the rest to the invoiced party upon receipt of funds.
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In the factoring service who is concerned as a Factor?a)The person who...
Understanding the Role of a Factor in Factoring Services
Factoring is a financial transaction where a business sells its accounts receivable (invoices) to a third party, known as a factor, at a discount. This allows the business to receive immediate cash instead of waiting for the payment terms of the invoices.
Who is the Factor?
In the context of factoring services, the term "factor" refers specifically to the entity that purchases the receivables.
Key Points to Understand:
- The Person Who Acquires the Receivables:
- The factor is primarily the buyer of the receivables. They take on the responsibility of collecting payments from the clients of the business.
- The Goods or Services Sold to an Agency:
- The initial transaction involves the sale of goods or services by the business to its customers, which creates receivables. These are the invoices that the factor will purchase.
- Both b & c are Correct:
- The factor is concerned with both the acquisition of receivables (c) and the nature of the goods or services sold (b).
- The factor needs to understand the business's operations to assess the risk of non-payment by customers.
Conclusion:
Thus, the correct answer is option 'D' because the factor is concerned with both the goods or services sold to an agency and the acquisition of receivables. This dual focus helps the factor mitigate risks and ensure effective cash flow management for the business they are supporting.
Factoring is a financial transaction where a business sells its accounts receivable (invoices) to a third party, known as a factor, at a discount. This allows the business to receive immediate cash instead of waiting for the payment terms of the invoices.
Who is the Factor?
In the context of factoring services, the term "factor" refers specifically to the entity that purchases the receivables.
Key Points to Understand:
- The Person Who Acquires the Receivables:
- The factor is primarily the buyer of the receivables. They take on the responsibility of collecting payments from the clients of the business.
- The Goods or Services Sold to an Agency:
- The initial transaction involves the sale of goods or services by the business to its customers, which creates receivables. These are the invoices that the factor will purchase.
- Both b & c are Correct:
- The factor is concerned with both the acquisition of receivables (c) and the nature of the goods or services sold (b).
- The factor needs to understand the business's operations to assess the risk of non-payment by customers.
Conclusion:
Thus, the correct answer is option 'D' because the factor is concerned with both the goods or services sold to an agency and the acquisition of receivables. This dual focus helps the factor mitigate risks and ensure effective cash flow management for the business they are supporting.
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In the factoring service who is concerned as a Factor?a)The person whose Receivables are acquiredb)The goods or services are sold to an agencyc)The person who acquires the receivablesd)Both b & cCorrect answer is option 'D'. Can you explain this answer?
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