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1) Why companies use overdraft for Receivables sir. the money we losing is just the money tight up right??? Or we take up a short term overdraft? why not use Capital.
2)When using The factor to pay 100% of our receivables in one month while using overdraft from bank why we use average receivables throughout the year if its gonna be paid in one month by the Factor and then its gonna be 0. so for 11 months we pay 0% interest. Am i right..confused..
1. The don’t have to use an overdraft – if the have a cash balance then allowing credit to customers is losing interest that they could have earned. In the exam they generally have an overdraft and are therefore paying interest.
2. All of our sales throughout the year will be delayed by one month so it is interest for a year.
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