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Essay / Research Paper Abstract
This 3 page paper is written in 2 parts, the first part looks at whether the doubling of accounts receivable days is good or bad, and explains the answer as well as looking at how and why this may occur. The second part discusses how a firm may decide on pricing for a new service, looking at pricing strategy costs and positioning. The bibliography cites 3 sources.
Page Count:
3 pages (~225 words per page)
File: TS14_TEARprice.rtf
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Unformatted sample text from the term paper:
A/R director should be questioned on why this is occurring, it is certainly not the time for a bonus, and may be an indication of poor control over the accounts
receivable. To consider why we need to look at what this ratio measures; this is a ratio that calculates the average number
of days it is taking the companys customers to pay their bills (Elliott and Elliott, 2007). If this doubles for example, from 30 to 60 this means that there
is an average time of 60 days being taken to pay bills, whereas before the change it was 30. The increased time taken to pay bills has a number
of potential negative implications. Increased time take to pay the bills increases the cash cycle of the organization and increases the level of working capital that is needed. This will
have opportunity cost as working capital is not productive, whereas capital invested elsewhere is likely to create a return (Nellis and Parker, 2006). There may also be a direct cost
is the firm needs to raise capital to ensure that it has sufficient liquidity to pay its own current liabilities, this may have a cost, especially if it is in
the form of borrowing, such as an overdraft or revolving credit facility. Other cash flow may include increasing the use of supplier credit accounts, increased borrowing, wherever it comes from
can have a negative impact on the liquidity of the firm. There is also the increased potential of defaults and bad debts, the longer a customer takes to pay
a bill, unless it is by prior agreement, the greater the potential of a default, which increases the risk associated with the outstanding amounts. However it is also possible
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