Ch. 20: Accounts receivable and Inventory Management INVENTOBY o 2002. Prentice Hall, Inc
Ch. 20: Accounts Receivable and Inventory Management © 2002, Prentice Hall, Inc
Accounts ceivable Management Size of investment in Accounts Receivable Percent of credit sales to Total sales Level of sales Terms of sale Quality of customer Collection efforts
Accounts Receivable Management Size of Investment in Accounts Receivable • Percent of Credit Sales to Total Sales • Level of Sales • Terms of Sale • Quality of Customer • Collection Efforts
Accounts ceivable Management Terms of sale quoted as a/b net c, which means deduct a% if paid within b days, otherwise pay within c days example: 3/30 net 60, means deduct 3 if paid within 30 days, otherwise pay the entire amount within 60 days
Accounts Receivable Management Terms of Sale • quoted as a/b net c , which means “deduct a% if paid within b days, otherwise pay within c days.” • example: 3/30 net 60, means “deduct 3% if paid within 30 days, otherwise pay the entire amount within 60 days
Accounts ceivable Management Terms of sale annualized opportunity cost of foregoing a discount
Accounts Receivable Management Terms of Sale • annualized opportunity cost of foregoing a discount:
Accounts ceivable Management Terms of sale annualized opportunity cost of foregoing a discount. a 360 c- b
x Accounts Receivable Management Terms of Sale • annualized opportunity cost of foregoing a discount: a 360 1 - a c - b