Fundamentals of Corporate Finance (3rd Edition) (Pearson Series in Finance)
3rd Edition
ISBN: 9780133507676
Author: Jonathan Berk, Peter DeMarzo, Jarrad Harford
Publisher: PEARSON
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Chapter 20, Problem 10CT
Summary Introduction
Pledging account receivables: In a pledging of account receivable arrangement, the lender of loan analyze the invoices of credit sales of the borrowing firm and decides which credit accounts that will be suitable for the lender to accept for collateral for the loan. The lender decides credit account for collateral on the basis of standards.
Factoring account receivables: Factoring is arrangement where the firm’s account receivables are sold to the factor and customer are directed to pay the amount directly to factor. The factor bears the risk related to account receivable of the firm.
To identify:
The difference between pledging of account receivable to secure a loan and factoring of account receivable and types of secured financing that firm can use to cover shortfalls.
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Chapter 20 Solutions
Fundamentals of Corporate Finance (3rd Edition) (Pearson Series in Finance)
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