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Accounts Receivable Risk Determination

Posted on:2005-10-06Degree:MasterType:Thesis
Country:ChinaCandidate:M YuFull Text:PDF
GTID:2206360122497340Subject:Accounting
Abstract/Summary:PDF Full Text Request
In the modern economy society, the most trade is based on credit. The trade credit is the most efficient means of settlement in enlarging the market, reducing the whole cost of the business, strengthening the power of the competition, and etc. However, with the development of the trade credit, a serious problem of accounts receivable emerges. Because of selling on trust blindly, many corporations have got excessive accounts receivable, among which many are bad and can not be reclaimed. As a result, these corporations are lack of sufficient cash, and can not survive, in the end, they go bankruptcy. Many cases from home and overseas corporations indicate that the power of the risk of accounts receivable is startling in destroying the vitality of the corporations.Except for the influence of macro economy conditions and the situation of the society credit, the most important reason for the corporations suffering from the risk of accounts receivable is the absence of controlling. Selling on credit can bring the corporations a mass of revenue in their financial statements, while the accounts receivable are not necessarily the real value. Before the accounts receivable are reclaimed, the value in it is dubious, that is the risk of the accounts receivable. The corporations those can not be aware of the risk on their accounts receivable will encounter the financial crisis consequentially someday. So the corporations must pay attention to the risk on their accounts receivable, and learn to analyze the risk and control it.This paper first studies the factors that causing the risk on the accounts receivable. Then it selects the most important four factors as the parameters for the model. The four factors are the probability of the accounts receivable could be reclaimed, the financial status of the client, the credit status of the client in the former trading, and the othercharacters of the client. At last, it constructs a model based on the four parameters measuring the risk on the accounts receivable. The corporations could measure the risk on their accounts receivable termly, and so that they can adjust their credit policy, enhance the level of management to their accounts receivable, and avoid the crisis causing by the dubious assets.
Keywords/Search Tags:accounts receivable, measuring the risk, the ratio of loss, the duration of accounts receivable
PDF Full Text Request
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