Which of the following statements best describes receivables management?
A) A firm that makes 90% of its sales on credit and 10% for cash is growing at a constant rate of 10% annually. This firm will be able to keep its accounts receivable at the current level, since the 10% cash sales can be used to support the 10% growth rate.
B) In managing a firm's accounts receivable, it is possible to increase credit sales per day yet still keep accounts receivable fairly steady, provided the firm can shorten the length of its collection period (its DSO).
C) If a firm has a high percentage of accounts over 30 days old, this is a sure sign that the credit manager is not doing his or her job well.
D) Since receivables and payables both result from sales transactions, a firm with a high receivables-to-sales ratio must also have a high payables-to-sales ratio.

Question

Quizplus · Accepted Answer

Receivables management involves managing a company's accounts receivable to improve cash flow by collecting outstanding debts and minimizing the risk of bad debts. One way to achieve this is by increasing credit sales per day while reducing the collection period. This helps to maintain a steady level of accounts receivable while improving cash flow. Options A, C, and D are not accurate descriptions of receivables management.

Which of the Following Statements Best Describes Receivables Management