A Survey and Analysis of Receivables Practices in American Corporations
COURSE TITLE: SEMINOR IN FINANCE COURSE CODE: MPH 622
A Survey and Analysis of Receivables Practices
in American Corporations
Cecillia Wagner Ricci, Seton Hall University, USA
Published in: Financial Practice and Education, Fall/Winter (1999)
May 6, 2011
Purpose & motivation
To obtain information on whether firms are
maximizing the value of their shareholders’
wealth in the area of receivables.
In another terms, to test the objective function
as maximization of shareholders wealth in
terms of areas of receivables
Purpose & motivation…..
Motivation of the study
Objective of the
gap (review based)
Population: Listed firms in the 1996 Business Week
Sample: 200 American firms
Response rate: 44.5% (89/200)
Respondents: Credit managers
Study period: 1996
Focus of the study: Receivable management in presale,
postsale and ongoing issues.
Profile of respondent
Remarks: Majority are managers, followed by controller and VP of finance
Remarks: 7 industries, Largest from consumer goods industry, followed
by technology industry, and the least transportation industry
Only the assets
ROE is higher in
but it is not
The indicators; market value, sales,
profits: as well as assets are lower in
respondent set and higher in non-
55.1% of the respondents do not have any of their receivables automated, followed by 34.8% of
respondents in range 81-100 percentage automated, and the least is no respondents in class 21-40.
45.9% have percentage overdue in range 1-20, followed by any of their percentage overdue for
30.3% of respondents, and the least respondents lie on 61-80 class.
Only 10.1% of
some of the receivables
or only 1
Further use of receivables (Outsourcing the receivables, Factoring & Pledging),
Using different methods for determining to
whom to grant credit, firms are not maximizing
shareholders’ wealth in terms of receivables.
Obtaining information from more than one
sources impact against the objective function.
The association between past dues and credit
investigating costs shows the maximization of
Majority of the respondents set credit limit for
their customers, supported by statistically
significant relationship between credit limit and
past due, that maximize the function.
Based on due date and postmark date survey,
US firms are receiving payments more quickly so
that maximize the objective function. But, it is
not free of response bias.
The use of more than one method for payment
collection, speed the collections that support the
goal of maximizing the shareholders wealth or
increase the cash inflows.
The use percentage of sales method to forecast
the receivables results, decrease in administrative
costs and finally maximize the wealth.
The association in two standard deviation
between monitoring the credit and past dues
accounts, confirmed the maximization of wealth.
The significant relation between number of
methods use for reporting to management and
existence of past due accounts support the
No sig.; Not
No sig.; Not
Setting credit limits, monitoring receivables and
reporting to management are in favor of
maximizing shareholders wealth i.e. minimization
of cost , or increase cost and progressively
accelerate the wealth.
Two variables are
against the objective
function i.e. only
The simple methodology of analysis provides the
elementary insight regarding the working capital
management practices in corporate America.
Specifically, this study is very much useful for early
practitioners, academic people, and with the same
extent it helps to researchers.
The study bear the pitfalls of the survey
methodology, thus the generalization of the
results might not be possible, and depends on
The responses tend to clusters usually in the
same magnitude in majority of the response
options. For instance, the responses usually
sticks on 70-80% range, may be due to small