Question

which of the following best describes factoring?
accounts receivable are sold for cash
exchanging cash in one currency for cash in another
selling inventory and receiving a debit to accounts receivable

Explanation:

• Factoring in business (specifically finance/accounting) involves a business selling its accounts receivable (unpaid customer invoices) to a factor (a third - party financial company) in exchange for immediate cash, usually at a discount.
• The option "exchanging cash in one currency for cash in another" describes currency exchange, not factoring.
• The option "selling inventory and receiving a debit to accounts receivable" is the normal process of making a credit sale (creating an accounts receivable), not factoring.

Answer:

A. accounts receivable are sold for cash