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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Financial Analysis of Receivables

A chain of retail stores located in Kansas and Nebraska has requested a loan from the bank at which you work. The balance sheet of the retail chain shows significant accounts receivable related to its in-house credit card. You have been assigned to evaluate these receivables.

Required:

What questions concerning the quality of these receivables can you answer by analyzing the retailer’s financial statements?

To determine

Receivables:

The receivables in the business refer to the amount of money which is due to be received from some other business or customer.

Credit Cards:

The credit cards are the form of factors that collects money instantly in an electronic mode. In-house credit cards are those which a company issues to increase sales on credit.

The questions concerning the receivables quality by analyzing the financial statements of retailer.

Explanation

In the given case, it is given that there is a chain of retail stores located in Kansas and Nebraska has requested a loan from bank. Before providing such loan, the balance sheet of the retail store is analyzed which shows receivables related to its in-house credit cards.

Now, on the basis of given information, for evaluation of receivables following questions can be raised:

  1. The time period given to the customers for clearing the payments...

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