The correct answer is: A. Receivables.
Securitization is the process of converting illiquid financial assets into liquid financial instruments. This is done by bundling together a group of assets and selling them as a single security. The assets that are securitized are typically receivables, such as mortgages or car loans.
When a company securitizes its receivables, it creates a new security called a security interest. The security interest is a claim against the assets that are being securitized. The investors who buy the security interest have a right to receive payments from the assets, even if the company defaults on its loans.
Securitization can be a very effective way for companies to raise capital. It allows companies to convert illiquid assets into liquid assets, which can then be sold to investors. This can provide companies with a significant amount of cash, which can be used to invest in new projects or to repay debt.
However, securitization can also be risky. If the assets that are being securitized default, the investors who bought the security interest will lose money. This is why it is important for companies to carefully select the assets that they securitize.
Here is a brief explanation of each option:
- Option A: Receivables are debts that customers owe to a company. When a company securitizes its receivables, it creates a new security called a security interest. The security interest is a claim against the assets that are being securitized. The investors who buy the security interest have a right to receive payments from the assets, even if the company defaults on its loans.
- Option B: Stock is a type of security that represents ownership in a company. When a company sells stock, it is essentially selling a piece of itself to investors. Investors who buy stock in a company become shareholders and have a right to a share of the company’s profits.
- Option C: Investments are assets that are held for the purpose of generating income or capital appreciation. Investments can include stocks, bonds, real estate, and other assets.
- Option D: Creditors are people or companies that have lent money to another person or company. When a person or company defaults on a loan, the creditors have the right to collect the debt.