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Why would a company sell its receivables to another company? What are problems?

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Why would a company sell its receivables to another company? Do you agree with this type of policy? What are the basic problems that could occur with this policy?

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Solution Summary

The solution explains the process of selling accounts receivable and the results of the sale. It then gives several reasons why a company would do this followed by a discussion of the problems that can arise as a result.

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A company will sell its receivables to another company for many reasons. The most important reason could be to increase its cash flow. The second important reason could be that the company fears a part of the receivables may not be actually received. Primarily, these two are the ...

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