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Question:

The type of short-term financing for which the financing cost is most closely tied to the creditworthiness of a firm’s customers is:

A factoring.
explanation

Factoring refers to the sale of receivables without recourse; that is, the risk that the firms customers will not pay, or will not pay in a timely manner, is borne by the factor, who purchases the receivables. Thus, the amount the factor will pay per dollar of receivables ' is lower (higher discount or interest Tate)- if the credit quality-of the firms credit customers is lower.

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