Receivables & Payables

Question 0

Receivables payment period calculation

Answer 0

[receivables/sales] * 365

Question 1

What is credit control?

Answer 1

Management of a firm’s working capital

1. Trade credit = business to business
2. Consumer credit = business to end-consumer

Question 2

Calculate EARLY SETTLEMENT DISCOUNT (implied cost of lost cash)

Answer 2

[100/100-d]^ (365/t) - 1

• d= discount offered
• • t= reduction in payment period in days
• x100 to get %

Question 3

What is the role of age analysis?

Answer 3

Aged analysis provides you with an overview of which contacts you have overdue accounts receivables for and whether or not these items are due for payment.

The list displays one line per contact, and the items are divided into various groups depending on how many days they are past the due date.

Default subdivision is: Not due, 30 days, 60 days, 90 days and Over 90 days.

Question 4

What is factoring?

Answer 4

Factoring is a financial transaction in which a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount