Factors Influencing The Receivables Level

A company's investment in receivables is influenced by the level of sales; if the investment tends to run at a set percentage, the greater the volume of sales, the greater the investment will be. Likewise, it is influenced by the nature of the product or service sold. If the company sells goods that are usually paid for by cash, such as candy and newspapers, the company will have no investment in receivables. However, if it sells building supplies for commercial projects or large IT systems, it will carry a significant amount of receivables. Finally, it is influenced by the credit and collection policies. If the company is lax in collecting receivables, or extends credit to slow payers, it will invest a greater amount in receivables than if it collects amounts due rapidly. Therefore, answer D. All of these are correct, is the correct answer.

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