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Which of the following statements is true? Select the correct answer from the options listed below Debt factoring involves outsourcing the business trade receivables management to a specialist sub-contractor. Debt factoring involves invoicing in home currency Debt factoring involves collecting cash payments immediately Debt factoring involves requesting to pay suppliers late and collecting cash immediately from customers

Question

Which of the following statements is true?
Select the correct answer from the options listed below
Debt factoring involves outsourcing the business trade receivables management to a
specialist sub-contractor.
Debt factoring involves invoicing in home currency
Debt factoring involves collecting cash payments immediately
Debt factoring involves requesting to pay suppliers late and collecting cash immediately
from customers

Which of the following statements is true? Select the correct answer from the options listed below Debt factoring involves outsourcing the business trade receivables management to a specialist sub-contractor. Debt factoring involves invoicing in home currency Debt factoring involves collecting cash payments immediately Debt factoring involves requesting to pay suppliers late and collecting cash immediately from customers

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VanessaVeteran · Tutor for 11 years

Answer

Debt factoring involves outsourcing the business' trade receivables management to a specialist sub-contractor.

Explain

## Step1: <br />Understanding each option is a critical first move in this type of problem. Go through all of the options one by one, and remember the context of each option as you evaluate it. It would be necessary to understand the debt factoring idea. Debt factoring refers to the transaction of selling the receivables of a company in order to gather immediate cash.<br /> <br />## Step2: <br />After a clear understanding of the question, let's move on to the multiple options available to the question.<br /> <br />- The first option "Debt factoring involves outsourcing the business' trade receivables management to a specialist sub-contractor" presents a plausible scenario in which businesses tend to sell their receivables to an outsider or third party that specializes in handling such situations.<br />- For option two, "Debt factoring involves invoicing in home currency". It is unrelated to currency choices and does so not represent an inherent feature of debt factoring.<br />- Regarding option number three, "debt factoring entails immediate cash payment collection". This option confuses the ideation behind debt factoring. The company doesn't collect immediate cash payments-- it's the purchasing factor (third party usually) and it gets paid eventually from the due parties.<br />- The fourth claim, "Debt factoring involves requesting to pay suppliers late and collecting cash immediately from customers," is incorrect as it doesn't aptly talk about debt factoring. Asking to pay suppliers late doesn't necessarily have anything to do with debt factoring.<br /> <br />## Step3: <br />Out of the processed options, the only one that correctly talks about debt factoring is the first one. So, it becomes our answer.
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