Kathleen has hired you as an outside consultant to advise her about receivables management.

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Kathleen has hired you as an outside consultant to advise her about receivables management.

So far, you
have developed a model that produces accounts receivable balances, average collection period (ACP), aging
schedules, uncollected balances schedules, and quarterly carrying costs for the end of March and the end of
June. The uncollected balances schedule permits managers to remove the effects of seasonal and or cyclical
sales variation and to construct an accurate measure of receivables payment patterns. Thus, it provides
financial managers with better aggregate information than do such crude measures as the ACP or aging
schedule. Kathleen anticipates that the venture capitalists at the conference will ask some questions
concerning the interpretation of the receivables data, the sensitivity of the results to the basic assumptions, and
the strategies to reduce carrying cost of receivables