Jim is quite impressed with your understanding of receivables and how they can be managed. He can also see that good information about what customers owe and how much they can actually pay can be very useful. Paul is appreciative of your work but is still a bit puzzled about why you have gone to all this effort. Pauls business has been successful so far and hes quite excited about that fact that his profit continues to increase now that he is making more credit sales.

Required 1 Explain to Paul why profit is not always the best measure of business success and why increased credit sales may cause problems for his liquidity in the future.