Question

accounts receivable is more liquid than inventory especially because of which of the following? it is a long - term asset that the businesses hold for several years. accounts receivable can be sold to factoring businesses. accounts receivable are never converted into cash.

Explanation:

• Option 1: Accounts receivable is a current (short - term) asset, not long - term, so this is wrong.
• Option 2: Factoring (selling accounts receivable) is a common way to quickly convert accounts receivable to cash, which relates to its liquidity. Inventory is harder to quickly convert, so this explains why accounts receivable is more liquid.
• Option 3: Accounts receivable is meant to be converted to cash (when customers pay), so this statement is false.

Answer:

B. Accounts receivable can be sold to factoring businesses.