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Working Capital Management Size of Investment

1. What factors determine the size of the investment a firm makes in account receivable? which of these factors are under the control of the financial manager?

2. How does the level of liquidity that a firm maintains affects its value?

3. What are the disadvantage and advantage of offering a discount for early payment?

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1. What factors determine the size of the investment a firm makes in account receivable? which of these factors are under the control of the financial manager?
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"Typically, accounts receivable accounts for just over 25 percent of a firm's assets.

The size of the investment in accounts receivable varies from industry to industry and is affected by several factors including the percentage of credit sales to total sales, the level of sales, and the credit and collection policies, more specifically the terms of sale, the quality of customer, and collection efforts.

Although all these factors affect the size of the investment, only the credit and collection policies are decision variables under the control of the financial manager. ...

Solution Summary

Working capital management is explored.

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