Collection of Cash

Companies monitor factors such as days sales outstanding and inventory levels to assess its ability to collect cash quickly from a potential customer. Discuss the financial ratios a firm can use to measure the time it will take to collect cash from a potential customer on average. Show how the ratios are computed, and explain how each works. Elaborate on why this is important to a business.

Account Receivable

Why would a company be willing to sell its accounts receivable at a discounted amount (the amount received from the buyer is less than the recorded amount)? Give at least three reasons and explain why.