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 is true about accounts receivable loans?

They are loans that must be repaid within 30 days regardless of the receivables' collection period.

They are loans that require no collateral and are based solely on a company's credit rating.

They are loans secured by a company's outstanding accounts receivable balances.

They are loans used exclusively for purchasing inventory.

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Verified step by step guidance

Understand the concept of accounts receivable loans: These are loans where a company uses its outstanding accounts receivable balances as collateral to secure financing. Accounts receivable represent amounts owed to the company by customers for goods or services provided on credit.

Analyze the first option: 'They are loans that must be repaid within 30 days regardless of the receivables' collection period.' This is incorrect because repayment terms for accounts receivable loans depend on the agreement with the lender, not a fixed 30-day period.

Evaluate the second option: 'They are loans that require no collateral and are based solely on a company's credit rating.' This is incorrect because accounts receivable loans are secured loans, meaning they require collateral, specifically the accounts receivable balances.

Assess the third option: 'They are loans secured by a company's outstanding accounts receivable balances.' This is correct because accounts receivable loans are indeed secured by the company's receivables, which act as collateral for the loan.

Review the fourth option: 'They are loans used exclusively for purchasing inventory.' This is incorrect because accounts receivable loans can be used for various purposes, not just inventory purchases. Their primary function is to provide liquidity based on receivables.