Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Types of Receivables

Financial Accounting

7. Receivables and Investments

Types of Receivables

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Multiple Choice

Which of the following is an important question to ask about accounts receivable when forecasting future cash flows?

How much inventory is held at year-end?

What is the company's depreciation expense for the period?

What is the expected collection period for outstanding receivables?

How are dividends distributed to shareholders?

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Verified step by step guidance

Understand the concept of accounts receivable: Accounts receivable represents the money owed to a company by its customers for goods or services provided on credit. It is an important asset on the balance sheet and directly impacts cash flow forecasting.

Recognize the importance of the collection period: The expected collection period for outstanding receivables is crucial because it determines when the company will receive cash from its customers. This timing affects the company's ability to meet its financial obligations and plan for future expenses.

Exclude unrelated factors: Inventory levels, depreciation expense, and dividend distribution are not directly related to forecasting cash flows from accounts receivable. These factors pertain to other areas of financial analysis and reporting.

Focus on cash flow forecasting: When forecasting future cash flows, the key question is how quickly the company can convert accounts receivable into cash. This involves analyzing historical collection patterns and considering any changes in credit policies or customer behavior.

Apply the concept to decision-making: By understanding the expected collection period, the company can make informed decisions about liquidity management, investment opportunities, and operational planning.