Fn 2640 assignment | Business & Finance homework help
Accounts receivable period measures how long it takes on average for customers to pay their outstanding invoices after they have received product or services , thus indicating days taken for an organization’s credit sales to be collected . Lastly, Average Payment Period refers to the time taken by a firm to settle its bills with suppliers from their due date till when actual payments are made.
These ratios are important since they provide organizations with insights about cash flows which can help them manage operations better and make more informed decisions regarding resource allocation or budgeting purposes . Comparing these figures against industry standards also allows firms evaluate performance relative to other organizations operating in same sector while providing them ability adjust operations accordingly if required.
In conclusion , measuring liquidity using inventory periods , accounts receivable periods and Average Payment Periods helps companies gain better understanding of their financial situation enabling them improve decision making capabilities while ensuring that funds are managed effectively across all departments within any given enterprise.