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 are never converted into cash. accounts receivable can be sold to factoring businesses.

Explanation:

To determine why accounts receivable is more liquid than inventory, we analyze each option:

• The first option is incorrect because accounts receivable is a short - term asset, not a long - term one held for several years.
• The second option is incorrect as accounts receivable are amounts owed to a business and are expected to be converted to cash (usually within a short period like 30 - 90 days).
• The third option is correct. Factoring is a process where a business can sell its accounts receivable to a factoring company (factoring business) for immediate cash. This ability to be sold quickly for cash makes accounts receivable more liquid than inventory, as inventory may take time to sell through normal sales channels and may also be subject to price discounts or obsolescence.

Answer:

The correct option is: Accounts receivable can be sold to factoring businesses.