...Managing Accounts Receivables Topic: Managing accounts receivables Name: Course: Instructor’s Name: Date: Accounts receivables have both positive and negative aspects. They are an indicator of robust sales and reliable customer base. However, the fact that accounts receivables do not constitute cash at hand or in the bank leaves a possibility of not collecting the money. Therefore, it is crucial to have in place, a system to manage accounts receivables, as well as logical implementation of effective credit and collection policies (Brigham, 2009). Credit and collection policies are an organization’s rules governing the functions of its credit and collection department. A billing manager should consider the organization’s mission and goals, financial obligations, and demands regarding risks when implementing such policies (Hong, 2008). In order to meet its financial obligations such as current expenses and bills, an organization should maintain an adequate float of cash in its possession. Ineffective credit and collection policies affect an organization’s cash flow. Policies that leave room for delayed collection activities, or extension in payment hinder a firm’s ability to meet its financial obligations (Hong, 2008). Any credit and collection policy should be in line with the organization’s goals. Organizations usually set goals that rhyme with their strategic direction and prevailing market conditions. Policies for managing credit should be in such a way as to foster...
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...Clear policies required on: 1. Which customers should receive credit? A- 5C’S-useful checklist • CAPITAL: the customer must appear to be financially sound before any credit is extended. If the customer is a business, its financial statement should be examined. Particular regards should be given to the customer’s likely future profitability and liquidity. • CAPACITY: the customer must appear to have the capacity to pay for the goods acquired on credit. The payment record of the customer to date should be examined to provide important clues. • COLLATERAL: It may be necessary to ask for some kind of security for goods supplied on credit. The customer should be able to offer a satisfactory form of security. • CONDITIONS: the state of the industry in which the customer operates, as well as the general economic conditions of the particular region or country, should be taken into account. The economic-conditions can have an important influence on the ability of the customer to pay on time. • CHARACTER : make some assessment of the customer’s character. The willingness to pay will depend of the honesty and integrity of the individual whom the business is dealing. When the customer is a business, this will mean assessing the characters of its senior managers as well as their reputation within the industry. The selling business must feel confident that the customer will make every effort to pay any amounts owing. A business will need to gather information...
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...CHAPTER 2 SYSTEM DEVELOPMENT LIFE CYCLE TYPES OF INFORMATION SYSTEM Transaction Processing Systems A transaction processing system provides a way to collect, process, store, display modify or cancel transactions. Most of these systems allow multiple transactions to take place simultaneously. The data that this system collects is usually stored in databases which can be used to produce reports such as billing, wages, inventory summaries, manufacturing schedules, or check registers. Management Information Systems A management information system is an information system that uses the data collected by the transaction processing system and uses this data to create reports in a way that managers can use it to make routine business decisions in response to problems. Some of the reports that this information system creates are summary, exception and ad hoc reports. All this is done to increase the efficiency of managerial activity. Decision Support Systems A decision support system helps make decisions by working and analyzing data that can generate statistical projections and data models. This system gives support rather than replacing a managers judgement while improving the quality of a managers decision. A DSS helps solve problems while using external data. Expert Systems and Neutral Networks An expert system, also known as a knowledge-based system, is a computer system that is designed to analyze data and produce recommendations, diagnosis and decisions that are controlled...
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...Submitted To: Khandakar Mahfuzul Alam Assistant professor, Department of Accounting Govt. Azizul Haque College, Bogra Submitted by: Sumita Akter University roll: 9795 Registration no: 1755608 Academic Session: 2010-11 Class Roll: 136 BBA (2nd year) Department of Accounting National University Govt. Azizul Haque College, Bogra Letter of Transmittal Date: Khandakar Mahfuzul Alam Assistant professor, Department of Accounting Govt. Azizul Haque College, Bogra Subject: Submission of Internal Term Paper Dear sir, I have the honour to state that I would like convey to your knowledge that as per our BBA program, I have prepared my Term paper under the topic of “Capital Structure Decision of a Firm” .Under your kind supervision. Now I like to submit my Term paper to you. I have tried my level best to prepare. The paper is consistence with the optional standard under your valuable. I request you modesty to accept my paper considering the limitations in papering with only the theoretical knowledge. Sincerely Yours Sumita Akter University roll: 9795 Registration no: 1755608 Academic Session: 2010-11 Class Roll: 136 BBA (2nd year) Department of Accounting National University Govt. Azizul Haque College, Bogra Preface All praised to the Almighty Allah who has given me the capability to write the Term Paper Than I would like to express my special thanks of...
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...immediately or the firm trade in credit to customer, then it create receivable in the books of the firm. Receivable management can be defined as “DEBT OWNED BY THE FIRM” rising from product is selling under credit. It is one of the main components of the working capital, others are inventors and cash. And then it is also one of the current assets of the firm. STATEMENT OF THE PROBLEMS:- “A study on the receivable management system” at JK TYRE LIMITED. NEED OF THE STUDY:- • It is one of the important components of the working capital in the business firm. • Effective receivables management ensure in increase of profit in the...
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...MANAGEMENT OF FINANCIAL SERVICES LESSON 13: FACTORING – THEORETICAL FRAMEWORK Lesson Objectives • • • • • • • Finance Maintenance of accounts Collection of debts Protection against credit risks”. To understand the Concept of Factoring. Methodology of Factoring and Forfeiting. Types of factoring. Introduction Receivables constitute a significant portion of current assets of a firm. But, for investment in receivables, a firm has to incur certain costs such as costs of financing receivables and costs of collection from receivables. Further, there is a risk of bad debts also. It is, therefore, very essential to have a proper control and management of receivables. In fact, maintaining of receivables poses two types of problems; (i) the problem of raising funds to finance the receivables, and (it) the problems relating to collection, delays and defaults of the receivables. A small firm’ may handle the problem of receivables management of its own, but it may not be possible for a large firm to do so efficiently as it may be exposed to the risk of more and more bad debts. In such a case, a firm may avail the services of specialised institutions engaged in receivables management, called factoring firms. At the instance of RBI a Committee headed by Shri C. S. Kalyan Sundaram went into the aspects of factoring services in India in 1988, which formed the basis for introduction of factoring services in India. SBI established, in 1991, a subsidiary-SBI Factors Limited with an...
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...other like companies. If management feels things aren't going well, they can help pinpoint the problem through comparing their ratios with other companies. They may have several ratios that are comparable, but a couple which are way off. That might be where the problem is. Also, ratio analysis may help by comparing your company with prior periods. If a particular ratio is declining when it would be better if it were staying the same or increasing, then again looking at the ratios are important to find out where the problem lies. Ratios are important to spot trends too They are calculated by dividing one statistic by another. For example one ratio use widely is PE--price to earnings. The price of the equity is divided by the earnings per share of the equity. That tells the relative price of an equity in relation to its earnings. Another is dividend %. That tells the amount of dividend divided by the price of the share of equity. Others commonly evaluated are gross margin; which is gross profit/sales, I think. Debt/equity which is debt of the company divided by equity or how leveraged the company is. ROI is another--profit divided by invested capital. This is a lot of information to take in but accounts receivable turnover ratio is a measure of the liquidity of a company's AR asset. Typically, the higher the turnover is, the more favorable it is. An interesting counter argument to the preceding statement is that a too high an account receivable turnover ratio may point...
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...program, I was placed in M.M. ISPAHANI Ltd. for completing my term paper. I was rotated in almost every desk of the organization and all over the factory. Statement of the Problem: The efficient management of working capital is very vital for a business survival. This is premised on the fact having too much working capital signifies inefficiency, whereas too little cash at hand signifies that the survival of business is shaky. Here I focus on working capital management practices in M. M. ISPAHANI Ltd. to evaluate the real condition that are existing. Objectives of the study: The main objective of the study is to gather practical knowledge about working capital management of M.M. ISPAHANI Ltd. My study covers the following areas: * To Study the working capital policies of the sample company. * To study the structure of working capital. * To measure the utilization of working capital of the sample company. * To examine the impact of working capital on profitability. * To identity the problems facing the sample company. * To suggest the recommendation of measuring working capital Management efficiency. Scope of the Study: In my term paper the sample size was one and M.M. ISPAHANI Ltd. was selected as a sample and my topic was working capital management. For gathering more about my requirements I have scheduled my time in various departments, such as Department | Days | Executive Officer | 07 | Finance & Accounts | 15 | Marketing &...
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...problem, like breaking the accounting rule, being in prison. For example, some employees avoid being laid off, they will help their companies hiding the real information or situations, so that affect the healthy development of the world economy. Independent auditors are held to their own standards and have their own independent boards of review that they answer to, so companies that hire them can be assured of the highest standards of quality and integrity. Secondly, professional skepticism is a key characteristic for auditors. Professional skepticism requires every auditor to have a questioning mind and a critical assessment of evidence. We can find this requirement on page 17 of our textbook. So auditors must responsible for not accept management assertion without corroboration. Even though some auditors and the companies have close relationship, they have to guard against being too trusting in accepting representations about the client’s financial statement. Auditors should keep their professional attitude and make a fair audit to the companies. In conclusion, hiring a CPA as controller who had...
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...Title: The analysis of Profitability and Liquidity management of Bangladesh Steel Re-Rolling Mills Limited. (The Comparative Ratio analysis of the Financial Statement between 2011 and 2012). Abstract: Liquidity and its management determines to a great extent the growth and profitability of a firm. This is because either inadequate liquidity or excess liquidity may be injurious to the smooth operations of the organization. This seeming controversy has attracted a lot of interest in the subject of liquidity management. The present study aims to reveal the Comparative analysis of liquidity and profitability of Bangladesh Steel Re-Rolling Mills Limited so that the company has to maintain this relationship while in conducting day to day operations. The results show that there is a significant impact of only liquid ratio on ROA while insignificant on ROE and EPS; the results also show that ROE is no significant effected by three ratios current ratio, quick ratio and liquid ratio while EPS is greatly affected by current ratios, quick ratios and liquid ratio. The main results of the study demonstrate that each ratio has a significant effect on the financial positions of enterprise with differing amounts and that along with the liquidity ratios in the first place. Profitability ratios also play an important role in the financial positions of enterprises. Every stakeholder has interest in the liquidity position of a company. Suppliers of goods will check the liquidity of the company...
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...CASH, TEMPORARY INVESTMENTS, ACCOUNTS RECEIVABLE and NOTES RECEIVABLE PROBLEM SOLUTIONS Assessing Your Recall Cash: Probable Future Value – The probable future value in cash is the ability of the cash to be exchanged for goods and services in the future. Ownership – Ownership is evidenced by possession of currency and by the right to control bank accounts. Temporary Investments: Probable Future Value - The probable future value in temporary investments is the cash payments that will be received from the investments in the future. These payments take the form of dividends in the case of shares and interest in the case of debt as well as the ultimate sales price of the securities when they are sold. Ownership – Ownership is evidenced by share or debt certificates although sometimes these documents are not distributed to the owners but a record is kept by the brokerage house that handles the investments for the company. Account Receivable: Probable Future Value – The probable future value in accounts receivable is that they represent the right to receive cash at some (usually fixed) date in the future. The cash, in turn, has value in the ability to be exchanged for goods and services in the future. Ownership – Ownership is evidenced by contracts either written or implied between the buyer and the seller. Invoices and shipping documents usually provide the necessary evidence of proof that a receivable exits. Notes Receivable: Probable Future Value – The probable...
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...Managerial Finance Solution Lawrence J. Gitman CHAPTER 15 Curent Liabilities Management Instructor’s RESOURCES Overview This chapter introduces the fundamentals and describes the interrelationship of net working capital, profitability, and risk in managing the firm's current liability accounts. The management of current liabilities requires choosing appropriate levels of financing and involves trade-offs between risk and profitability. This chapter also reviews sources of secured and unsecured short-term financing, including the role of international loans. Spontaneous sources, such as accounts payable and accruals, are differentiated from negotiated bank sources, such as lines of credit. The cash discount offered on accounts payable and the costs of forgoing the discount are described. Secured sources include bank and commercial finance company loans backed by collateral such as inventory or accounts receivable. PMF DISK This chapter's topics are not covered on the PMF Tutor or the PMF Problem-Solver. PMF Templates The following spreadsheet template is provided: Problem 15-8 Topic Cost of bank loan Find out more at www.kawsarbd1.weebly.com 393 Last saved and edited by Md.Kawsar Siddiqui Part 5 Short-Term Financial Decisions Study Guide The following Study Guide examples are suggested for classroom presentation: Example 1 4 Topic Loss of loan discounts Accounts receivable as collateral Find out more at www.kawsarbd1.weebly.com 394 Last saved and...
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...Controls for Inflows Controls for Inflows Internal controls are a vital component in the business process and can serve to deter and minimize risks associated with day-to-day business. Internal controls are designed to safeguard a company’s assets by preventing theft, fraud, and waste of company resources. They are also implemented to ensure compliance with internal and other regulations. Sarbanes-Oxley Act of 2002 (2003) requires information from management and the auditors regarding the effectiveness and efficiency of a company’s internal controls. Effective internal controls will ensure reliability of financial reports. This proposal includes internal controls each company should implement for cash, sales, accounts receivable, inventory, and production. Cash A company must have strong effective internal control to protect against its cash resource. “Cash is highly liquid (easily converted into cash!), not easily identifiable as company property, and highly portable. For these reasons, cash is the favorite target of employee thieves, although theft of inventory is a close second” (Louwers, Ramsay, Sinason, & Strawser, 2007, p, 211). A company should have written processing procedures for cash known by those involved with cash. Additionally cash (includes money orders and checks) should always be stored in a locked and secured area. One main internal control for protection of cash is segregation of duties. Collection, accounting, and reconciliation of cash...
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...performing the audit on Smacky Dog Food. We have done our research over the company and the industry as a whole. We are aware that Smacky Dog Food is a small wholesale distributer of perishable dog food. Currently the company has a loan of $150,000 and is asking for another $150,000 to expand their business. The bank assumes the $150,000 risk and our client has the obligation to pay down their debt. Keller CPA will perform the necessary analytical procedures to better understand the financial strength of the company. Our preliminary judgment about Smacky Dog Food’s materiality is negative in respect to their Reliability of financial reporting: Management is responsible for preparing statements for inventors, creditors and other users. Income statements, balance sheet, and cash flow statements are not provided by management. We have conducted the audit in accordance with Generally Accepted Accounting Standards. By following these standards we will perform this audit so it will be free of material misstatements. An audit includes understanding the clients business and industry, assessing client business risk, performing analytical procedures, set materiality and assess acceptable audit risk and inherent risk, understanding internal control and assess internal control risk, and finally gather information to assess fraud risk. We will review all financial statements provided by our client to formulate an unbiased opinion on the company and its financial operations. As...
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...Week 4: Internal Control, Cash, and Receivables - Class Activity 1. | Which one of the following is not a primary component of an internal control system? A. | Risk assessment | B. | Information and communication | C. | Monitoring | D. | Rationalization | | 2. | Which of the following is not a reason why an organization establishes a system for internal control? A. | To safeguard its assets | B. | To increase efficiency of operations | C. | To ensure compliance with laws and regulations | D. | All of these are reasons why an organization establishes a system for internal control. | | 3. | Which of the following statements is correct? A. | Control is most effective when two or three people are given responsibility for the same task. | B. | The person who has custody of assets should not perform the record keeping for the assets. | C. | The person who has custody of assets should also perform the record keeping for the assets. | D. | It is often a waste of company resources to have an employee perform independent internal verification. | | 4. | Internal auditors A. | are hired by CPA firms to audit business firms. | B. | are employees of the IRS who evaluate the internal controls of companies filing tax returns. | C. | evaluate the system of internal controls for the companies that employ them. | D. | cannot evaluate the system of internal controls of the company that employs them because they are not independent. | | 5. | Segregation...
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