Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Types of Receivables

Financial Accounting

7. Receivables and Investments

Types of Receivables

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Multiple Choice

Which of the following best describes the role of a cosigner in relation to receivables, and what is an important consideration before agreeing to co-sign a loan?

A cosigner is the borrower who receives the loan; they should consider the collateral required before co-signing.

A cosigner is a third-party collection agency that purchases receivables; they should consider the age of the receivable before co-signing.

A cosigner is a person who guarantees repayment of a loan if the primary borrower defaults; they should consider their own credit risk before co-signing.

A cosigner is the original lender who transfers the receivable to another party; they should consider the interest rate before co-signing.

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Verified step by step guidance

Understand the role of a cosigner: A cosigner is a person who guarantees repayment of a loan if the primary borrower defaults. This means the cosigner is legally obligated to repay the loan if the borrower fails to do so.

Clarify the relationship to receivables: A cosigner does not directly deal with receivables or act as a collection agency. Their role is tied to the loan agreement, not the management or transfer of receivables.

Identify the key consideration: Before agreeing to co-sign a loan, the cosigner should evaluate their own credit risk. This includes understanding how co-signing could impact their credit score and financial liability.

Eliminate incorrect options: Review the other descriptions provided in the problem. For example, a cosigner is not the borrower, a collection agency, or the original lender transferring receivables. These roles are unrelated to the cosigner's function.

Conclude with the correct answer: The correct description is that a cosigner guarantees repayment of a loan if the primary borrower defaults, and they should carefully consider their own credit risk before agreeing to co-sign.