Corporate Finance
Corporate Finance
3rd Edition
ISBN: 9780132992473
Author: Jonathan Berk, Peter DeMarzo
Publisher: Prentice Hall
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Chapter 27, Problem 15P
Summary Introduction

To discuss: The difference between pledging accounts receivable and factoring accounts receivable to secure a loan.

Introduction:

When the firm uses the accounts receivables as a loan’s collateral security, then it is termed as pledging accounts receivable. Factoring of accounts receivable is a term where the firm sells the accounts receivable to a third party at a discount rate.

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