Answer the following statements true (T) or false (F)
1. Factoring accounts receivable is relatively an expensive source of secured short-term funds that allows firms to turn accounts receivable immediately into cash.
2. A trust receipt inventory loan is an arrangement in which the lender receives control of the pledged inventory collateral, which is stored by a designated agent.
3. Inventory is more attractive than accounts receivable as a short-term collateral since it normally has a market value greater than its book value, which is used to establish its value as collateral.
4. A floating inventory lien is most attractive when the firm has a stable level of inventory that consists of a diversified group of relatively inexpensive merchandise.
5. Under the floating inventory lien, the borrower is free to sell the merchandise and is expected to remit the amount lent against each item, along with accrued interest, to the lender immediately after the sale. The lender then releases the lien on the appropriate item.
1. TRUE
2. FALSE
3. FALSE
4. TRUE
5. FALSE
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