Question 2(c) 
The requirement here was to evaluate two offers made by a factor. Better answers looked at costs and benefits in a methodical way, either on an incremental basis by looking at the two offers, or by costing the current position and the net costs and benefits of each offer. The meaning of with recourse (bad debts revert to the company) and without recourse (bad debts are taken by the factor) had to be understood in order to calculate correctly the relative benefits in terms of bad debts, and some answers were not able to do this. Another key area that some candidates found challenging was calculating the financial benefit of a lower level of receivables, and the 
increased interest cost on the advance made by the factor.

Question 2(d) 
This part of question 2 asked for comment on the financial acceptability of the factor’s offer and discussion of the possible benefits of factoring. Credit was given for an appropriate comment on the results of the financial analysis in part (c). Discussion of the possible benefits of factoring was of variable quality, with weaker answers often doing little more than repeating back the features of the factor’s offer given in the question. Better answers gave a more informed discussion of the benefits of factoring, looking for example at the expertise of the factor, insurance against bad debts and so on.