Evaluate the liquidity of receivables


The following is a list of activities that companies perform in relation to their receivables.

1. Selling receivables to a factor.

2. Reviewing company ratings in The Dun and Bradstreet Reference Book of American Business.

3. Collecting information on competitors payment period policies.

4. Preparing monthly accounts receivable aging schedule and investigating problem accounts.

5. Calculating the accounts receivable turnover and average collection period.


Match each of the activities listed above with a purpose of the activity listed below.

6. Determine to whom to extend credit.

7. Establish a payment period.

8. Monitor collections.

9. Evaluate the liquidity of receivables.

10. Accelerate cash receipts from receivable when necessary.

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Accounting Basics: Evaluate the liquidity of receivables
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