Monitoring Receivables

To keep track of payments by customers, most firms will monitor outstanding accounts. First of all, a firm will normally keep track of its average collection period, ACP, through time. If a firm is in a seasonal business, the ACP will fluctuate during the year, but unexpected increases in the ACP are a cause for concern. Either customers in general are taking longer to pay, or some percentage of accounts receivable is seriously overdue.

Ross et al.: Fundamentals of Corporate Finance, Sixth Edition, Alternate Edition

VII. Short-Term Financial Planning and Management

21. Credit and Inventory Management

© The McGraw-Hill Companies, 2002

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