# Factoring definitions

The selling or transferring of accounts receivable in order to gain funds that are immediately available. A company sells its receivables to another company, which is called a factor. Factoring can be done without recourse, which means that the company that buys the accounts receivable bears the risk of repayment. One example of factoring without recourse is taking a charge such as American Express, Visa, or MasterCard to pay for a purchase. Factoring can be done with recourse, which means that the company that originally sold the goods will be liable to the purchaser if the receivable is not collected. Discounting is another form of financing accounts receivables.

In mathematics, the integer prime factorization—also called prime decomposition—problem is stated like this: Given a positive integer, write it as a product of prime numbers.
According to the fundamental theorem of mathematics, the factorization is always unique—which is why factoring is of fundamental significance to cryptography. Because for large integers, factoring is a difficult problem (because there is no known method to carry it out quickly), its complexity forms the basis of the assumed security of public key cryptography. In brief, public key cryptography is a form of cryptography in which two digital keys are generated, one private and one public. These keys are used for encrypting messages; either one key is used to encrypt a message and another is used to decrypt it, or one key is used to sign a message and another is used to verify the signature. RSA, an algorithm described in 1977 by Ron Rivest, Adi Shamir, and Len Adleman, is a public key used widely in electronic business (or e-business).
Farlex, Inc. The Free Dictionary: Factoring. [Online, 2004.] Farlex, Inc. Website. http://encyclopedia.thefreedictionary.com/Factoring.

A financial transaction whereby a business sells its accounts receivable to a third party (called a factor) at a discount.

noun

Present participle of

*factor*.verb

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