Page 161 - DMGT409Basic Financial Management

Basic Financial Management Rupesh Roshan Singh, Lovely Professional University

Notes Unit 9: Basics of Receivables

CONTENTS

Objectives
Introduction
9.1 Meaning and Characteristics of Accounts Receivables
9.2 Concept of Account Receivable Management
9.2.1 Objectives of Accounts Receivables Management

9.2.2 Costs of Accounts Receivables Management
9.3 Factors Influencing the Size of Investment in Receivables

9.4 Credit Policy
9.5 Credit Evaluation of Individual Accounts

9.6 Monitoring Accounts Receivables
9.7 Summary
9.8 Keywords
9.9 Self Assessment
9.10 Review Questions

9.11 Further Readings

Objectives

After studying this unit, you will be able to:

z Define meaning and characteristics of receivables
z Discuss concept of accounts receivables management
z Explain credit policy
z Describe credit evaluation and monitoring

Introduction

Accounts Receivables occupy an important position in the structure of current assets of a fi rm.
They are the outcome of rapid growth of credit sales granted by the firms to their customers.

Credit sales are reflected in the value of Sundry Debtors [SD’s In India]. It is also known as
Trade Debtors (TD’s), Accounts Receivables (AR’s), Bills Receivables (BR’s) on the asset side
of balance sheet. Trade credit is most prominent force of modern business. It is considered as a
marketing tool acting as a bridge between production and customers. Firm grants credit to protect
its sales from the competitors and attract the potential customers. It is not possible to increase

sales without credit facility, increase in sales also increases profits. But investments on accounts
receivables involve certain costs and risks. Therefore, a great deal of attention is normally paid to

the effective and efficient management of accounts receivables.

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