Q.A business sells its outstanding trade receivables (debtors) to a financial institution at a discount, in order to obtain immediate cash. This arrangement is known as:
(A) Leasing
(B) Factoring
(C) Ploughing back of profits
(D) Public deposit

This is a straightforward definitional match between an arrangement described in the stem and the correct technical term for it.

Each option is checked against the arrangement described: selling trade receivables (debtors) to a financial institution at a discount for immediate cash.

(A) Leasing is an arrangement to use an asset like machinery for an agreed period against rental payments, without buying it — it has nothing to do with selling receivables, so it does not match.

(B) Factoring is exactly this arrangement — a business sells its outstanding customer receivables to a financial institution known as a factor, at a discount to their face value, in exchange for immediate cash, and the factor then collects the amount from the debtors. This matches the description precisely. …

Students sometimes confuse factoring (selling what OTHERS owe you, i.e. your debtors) with trade credit (what YOU owe your OWN suppliers) — the direction of the receivable/payable matters: factoring is about collecting money owed t …