Determinants of Accounts Receivable Level: Portfolio Approach in Firm's Trade Credit Policy
AbstractTrade credit management should contribute to realization of basic financial purpose of an enterprise which is the is maximization of its value. Many of the current asset management models that are found in financial management literature assume book profit maximization as the basic financial purpose. These book profit-based models could be lacking in what relates to maximization of enterprise value. The enterprise value maximization strategy is executed with a focus on risk and uncertainty. This article presents the consequences that can result from operating risk that is related to purchasers using payment postponement for goods and/or services. The present article offers a method that uses portfolio management theory to determine the level of accounts receivable in a firm. An increase in the level of accounts receivables in a firm increases both the net working capital and the costs of holding and managing accounts receivables.
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Bibliographic InfoArticle provided by University of Economics, Prague in its journal Acta Oeconomica Pragensia.
Volume (Year): 2008 (2008)
Issue (Month): 5 ()
Postal: Redakce Acta Oeconomica Pragensia, Vysoká škola ekonomická v Praze, nám. W. Churchilla 4, 130 67 Praha 3
Find related papers by JEL classification:
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- P33 - Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Business, and Aid
- P34 - Economic Systems - - Socialist Institutions and Their Transitions - - - Finance
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