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      Question

      The type of factoring under which the factor collects

      back from the seller the amount paid by him in case of non payment of bills on the due date is called
      A Recourse factoring Correct Answer Incorrect Answer
      B Non-recourse factoring Correct Answer Incorrect Answer
      C Bills discounting Correct Answer Incorrect Answer
      D Forfaiting Correct Answer Incorrect Answer
      E Export factoring Correct Answer Incorrect Answer

      Solution

      Factoring is an arrangement wherein the organization can convert its debtors, into realization of an upfront cash by delegating the work of collection from the debtors to an outside party or selling the debtor invoice to a third party financier in return of a fee. ·       Factoring with Recourse - In case of non-payment of the invoice value by the debtors, the Factoring company can collect the invoice value from the client. So the risk of non-payment by debtor falls on the client itself. ·       Factoring without Recourse - In case of non-payment of the invoice value by the debtors, the Factoring company cannot collect the invoice value from the client. So the risk of non-payment by debtor falls on the factor and not the client.

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