Assume a Company Has Been Maintaining a Receivables Factoring Program

Assume a company has been maintaining a receivables factoring program for the past five years and has been experiencing the same level of sales, factoring, and bad debts over that period. Customers typically pay their receivables within 60 days. Which of the following is true with respect to the current period (all else equal) ?

A) The accounts receivable balance will decrease.
B) Cash flow from operations is stable.
C) Net income is likely to decline.
D) Accounts receivable payable within 60 days cannot be factored.

Correct Answer:

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