Southern fabric factors all of its receivables the firm, Ask an Expert

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Southern Fabric factors all of its receivables. The firm does $150 million in business each year and would have an ACP of 36.5 days if it collected its own receivables. The firm's grow margin is 35%. The factor operates without recourse and pays immediately upon taking over the accounts. It discounts the gross amount factored by 10% and pays Southern immediately. Because the factor doesn't collect from customers until they pay, it charges interest at 10% in the interim.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9950482

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