Factoring of Accounts Receivable
Spending money on revenue expenditure.
Raising equity finance or long term borrowings to buy non-current assets.
Selling off a segment of the business because it is unprofitable.
Raising short term finance to improve working capital.
Determining what proportion of profits will be retained by the company.
None of the above.
Represent contractual claims on a firms income and assets.
Can arise spontaneously from a firm's operations.
Are sources of funds for a firm.
Grow in line with an increase in trading operations.
Should be used to finance temporary movements in current assets.
Trade credit has an implicit interest cost.
Large firms tend to use trade credit more than small firms.
The total trade creit owed by a company at any point of time is termed "accounts receivable".
Trade credit arises from the time differential between receipt and payment for goods purchased by the business.
Trade credit is usually secured by a floating charge over the company's assets.
Has a deferred claim on assets.
Costs are tax deductible while cost of equity is not.
Costs are significant while equity costs nothing.
Costs are an appropriation of profits.
None of the above.
Prompt payment by the factoring company.
Insignificant cost of factoring
Loss of contact with the firm's customers.
Reduction of the firm's doubtful debts.
A financial lease.
An operating lease
A residual lease
A sale an leaseback
A leveraged lease.
The high level of security offered by the borrowing company.
Borrowing is over a long term period at a very high interest rate.
At any one time a company which has a surplus of funds is matched with a company which has a deficiency of funds.
It is very convenient if the two companies are located near each other.
Can only be achieved if the borrowing company is a private company.
Allows the lessee to obtain cash for an asset but still retain title to the leased asset.
Allows the lessee to obtain cash for an asset but still retain use of the leased asset.
Is almost always an operating lease.
Provides a tax shield to the lessor.
Is a form of residual lease.
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