Chapter

Managing Account Receivables

Lorenzo A. Preve and Virginia Sarria-Allende

in Working Capital Management

Published in print March 2010 | ISBN: 9780199737413
Published online May 2010 | e-ISBN: 9780199775637 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199737413.003.0006

Series: FMA SURVEY

Managing Account Receivables

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In this chapter, we discuss trade receivables and credit risk. We begin by providing a brief review of the main theories of trade credit. Next, we consider the credit risk embedded in firms' investment in trade receivables, and discuss how to correctly assess and manage the credit risk inherent in clients' trade credit. We continue by presenting several tools that can help creditors mitigate the effects of clients' defaults. Then, we focus on alternative mechanisms that allow firms to specifically finance their investment in clients, namely, factoring and the issuance of collateralized debt. Finally, we briefly review how trade credit can be measured.

Keywords: corporate finance; working capital management; trade credit policy; trade credit management; accounts receivables

Chapter.  5835 words. 

Subjects: Financial Markets

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