If holding accounts receivable on a level defined by the enterprise provides greater advantages than negative influence, the firm value will grow.Ĭhanges in the level of accounts receivable affect on the value of the firm. VALUE BASED ACCOUNTS RECEIVABLE MANAGEMENT Increase in the level of accounts receivables in a firm increases both net working capital and the costs of holding and managing accounts receivables.Ī liberal policy in accounts receivable coupled with the portfolio management approach could increase the value. The present article offers a method that uses portfolio management theory to determine the level of accounts receivable in a firm. These book profit-based models could be lacking to maximization of enterprise value as aim. Many of the current asset management models that are found in financial management literature assume book profit maximization as the basic financial purpose. Trade credit management should also contribute to realization of this fundamental aim. The basic financial purpose of an enterprise is maximization of its value.
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