Question
Which of the sources of finance is expensive when the invoices are numerous and smaller in amount?
Answer: Option B
:
B
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B
Factoring: It is an expense when the invoices are numerous and smaller in amount. The factor (the funding source) buys the right to collect on that invoice by agreeing to pay the invoice's face value less a discount--typically 2 to 6 percent. The factor pays 75 percent to 80 percent of the face value immediately and forwards the remainder (less the discount) when the customer pays.
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