{"id":55267,"date":"2024-04-16T00:24:29","date_gmt":"2024-04-16T00:24:29","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=55267"},"modified":"2024-04-16T00:24:29","modified_gmt":"2024-04-16T00:24:29","slug":"out-of-the-following-what-is-not-true-in-respect-of-factoring","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/out-of-the-following-what-is-not-true-in-respect-of-factoring\/","title":{"rendered":"Out of the following, what is not true in respect of factoring?"},"content":{"rendered":"<p>[amp_mcq option1=&#8221;Continuous arrangement between Factor and Seller&#8221; option2=&#8221;Sale of Receivables to the factor&#8221; option3=&#8221;Factor provides cost free finance to seller&#8221; option4=&#8221;None of the above&#8221; correct=&#8221;option3&#8243;]<!--more--><\/p>\n<p>The correct answer is: C. Factor provides cost free finance to seller.<\/p>\n<p>Factoring is a type of financial arrangement in which a company sells its accounts receivable to a third party, known as a factor, at a discount. The factor then collects the receivables from the customers and pays the company the net amount, less the discount and any fees.<\/p>\n<p>Factoring can provide a number of benefits to companies, including:<\/p>\n<ul>\n<li>Improved cash flow: By selling its receivables, a company can receive cash immediately, rather than having to wait for its customers to pay. This can be helpful for companies that need to meet short-term financial obligations.<\/li>\n<li>Reduced risk: When a company sells its receivables, it transfers the risk of non-payment to the factor. This can be a significant benefit for companies that sell to customers with poor credit histories.<\/li>\n<li>Increased borrowing capacity: Factoring can improve a company&#8217;s creditworthiness, which can make it easier for the company to borrow money.<\/li>\n<\/ul>\n<p>However, there are also some potential drawbacks to factoring, including:<\/p>\n<ul>\n<li>Loss of control: When a company sells its receivables, it loses control over the collection process. This can be a problem if the factor is not as effective at collecting receivables as the company itself.<\/li>\n<li>Cost: There are typically fees associated with factoring, which can reduce the amount of cash that the company receives.<\/li>\n<li>Loss of flexibility: Once a company has sold its receivables, it cannot collect them directly from its customers. This can be a problem if the company needs to collect payments quickly or if it wants to offer its customers discounts for early payment.<\/li>\n<\/ul>\n<p>Overall, factoring can be a useful tool for companies that need to improve their cash flow or reduce their risk. However, it is important to carefully consider the potential drawbacks before entering into a factoring arrangement.<\/p>\n<p>In the question, option A is true because factoring is a continuous arrangement between the factor and the seller. Option B is true because the seller sells its receivables to the factor. Option D is true because factoring can provide a number of benefits to companies, including improved cash flow, reduced risk, and increased borrowing capacity. Option C is false because the factor typically charges fees for its services, which means that the seller does not receive cost-free finance.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>[amp_mcq option1=&#8221;Continuous arrangement between Factor and Seller&#8221; option2=&#8221;Sale of Receivables to the factor&#8221; option3=&#8221;Factor provides cost free finance to seller&#8221; option4=&#8221;None of the above&#8221; correct=&#8221;option3&#8243;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"class_list":["post-55267","post","type-post","status-publish","format-standard","hentry","category-financial-management","no-featured-image-padding"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Out of the following, what is not true in respect of factoring?<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/out-of-the-following-what-is-not-true-in-respect-of-factoring\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Out of the following, what is not true in respect of factoring?\" \/>\n<meta property=\"og:description\" content=\"[amp_mcq option1=&#8221;Continuous arrangement between Factor and Seller&#8221; 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