rcv - CHAPTER 23 RECEIVABLES MANAGEMENT CONTENTS...

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CHAPTER 23 RECEIVABLES MANAGEMENT
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Chapter 23 Receivables Management 2 CONTENTS Introduction Meaning and Importance of Accounts Receivables Impact of Credit Policy Credit Terms Credit Period Discount Rate Discount Period Components of Credit Policy Determining Credit Limit
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Chapter 23 Receivables Management 3 INTRODUCTION ± Management of Accounts receivables assumes significance due to the amount of funds blocked in them. ± It is due to their size that the receivables affect both, the top-line and the bottom-line.
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Chapter 23 Receivables Management 4 INTRODUCTION ± The major issue for the firms therefore is whether the alteration in the receivables (credit) policy by the firm is beneficial. ± The relationship between the credit policy variables and their impact on the wealth of the shareholders in case of any policy change is an issue of prominence in receivables/ credit management.
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Chapter 23 Receivables Management 5 MEANING AND IMPORTANCE OF ACCOUNTS RECEIVABLES ± The combined monetary value of unpaid customer invoices is termed as accounts receivables or simply receivables. ± These receivables normally come in the form of operating lines of credit. ± They are usually due within a relatively short time period, ranging from a few days to a year. ± For regular customers it is like a facility of revolving credit.
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Chapter 23 Receivables Management 6 MEANING AND IMPORTANCE OF ACCOUNTS RECEIVABLES ± The management and control of receivables assume importance as they constitute a sizeable portion of firms’ assets. ± This percentage varies from industry to industry. ± They typically comprise slightly over 22 per cent of the assets of the manufacturing sector. ± For capital goods industry they may go up to as high as 45-50 %.
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Receivables Management 7 MEANING AND IMPORTANCE OF ACCOUNTS RECEIVABLES ± The level of sales is one of the key determinants of the size of the investment in accounts receivable. ± Nature of business also affects the
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rcv - CHAPTER 23 RECEIVABLES MANAGEMENT CONTENTS...

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