What is factoring in the context of financing sources?

Factoring, in the context of financing sources, refers to the process of selling accounts receivable at a discount to obtain immediate cash. This allows businesses to improve their cash flow and meet short-term financial obligations without waiting for customers to pay their invoices. By leveraging the value of their receivables, companies can access funds quickly, which can be crucial for managing day-to-day operations, investing in growth opportunities, or addressing unexpected expenses.

The other options describe different financing strategies. For instance, buying long-term investments with borrowed funds focuses more on investment strategy rather than immediate cash flow. Obtaining loans secured by inventory involves taking a loan where the inventory serves as collateral, which is a more traditional form of borrowing, and does not relate to accounts receivable. Delaying payment of supplier invoices involves extending credit with suppliers and doesn't involve selling any assets for cash. These distinctions highlight why the second option accurately defines factoring within financial practices.