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      Question

      Factoring of receivables is a tool used

      for:
      A Long-term financing Correct Answer Incorrect Answer
      B Financing fixed assets Correct Answer Incorrect Answer
      C Financing mergers & acquisitions Correct Answer Incorrect Answer
      D Managing and financing working capital Correct Answer Incorrect Answer
      E Raising equity capital Correct Answer Incorrect Answer

      Solution

      Factoring involves selling a company's accounts receivable (invoices) to a third party (a factor) at a discount. It is a financial transaction that provides immediate cash, thereby financing the working capital cycle and also outsourcing the task of collection.

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