Dear Sir,
Can I ignore information of "bad debt ratio reduce to 2%" in the below question when calculation of factoring cost ?
Company has current bad debt ratio : 3%
If company use factor with non recourse agreement, bad debt ratio reduce to 2%
In this case, benefit from reducing bad debt due to use factor will be = 3% * account receivable ; regardless "bad debt ratio reduce to 2%" ?
Thank you
Ask the Tutor ACCA FM
Factoring
5y ago#1Yes - if it is non-recourse factoring then they will save the whole 3%. (If it was with recourse factoring then they would only save 1%).
Thank you sir, maybe we do not need to use all information provided and maybe it is easy to make mistake.
5y ago#3You are welcome :-)
This topic is locked — no new replies.