After this video, learners will be able to describe how receivables are leveraged by a business, and also their impact to cash flow.
- Okay, we just talked about cash management. … Now, let's talk about receivables management. … Recall that receivables are the amounts of money … owed to us by customers. … We want to manage our receivables … to ensure that they turn into cash. … But let's ask the question, why would anybody … have receivables in the first place? … Why not just sell for cash? … Well, it turns out credit sales are a marketing technique. … It turns out if we will offer credit, … we will get more sales. … If I'm offering you a product and you have to pay cash here … and my competitor down the road is allowing you … to pay in 30 days for the same product, … you'll go down there, all of the things being equal. … Now, if credit sales increase sales, … why not offer credit to everyone? … Well, it turns out if you offer credit to anyone … and everyone, there will be a lot of people … who won't pay you. … You'll have bad debts associated with that … and so it's a trade off. … I'll increase my sales, but I'll have people …
- Describe how decision-makers use accounting in a business.
- Recognize limitations in financial statement analysis.
- Relate the purpose of financial ratio analysis.
- Determine the primary reason for managing cash through the operating cycle.
- Define the role of efficiency in creating budgets.
- Identify differences between federal income tax and other taxes, such as state sales tax.