The document discusses various topics related to working capital, credit, and accounts receivable management. It defines key terms like cash conversion cycle, days' receivables, days' payables, and presents formulas to calculate them. It also discusses credit policies, objectives of credit management, reasons for offering credit, costs associated with credit, and techniques for monitoring and controlling accounts receivable like aging schedules and days' sales outstanding.

2. Cash Flow Cycle of a Business Purchase of Materials Payment for Materials Sale of Product Collect A/R Days’ Inventory Cash Conversion Cycle Days’ Receivables Days’ Payables Day 1 Day 30 Day 45 Day 75

3. Working Capital Cash Flow Cycle: Cash Conversion Cycle Formulas for three time periods are necessary to calculate the cash conversion cycle.

20. Aging Schedule Separates A/R into current and past due receivables in 30-day increments (on a customer or aggregate basis) and can determine the percent past due Age of Accounts A/R % of A/R 0 – 30 days 31 – 60 days 61 – 90 days 91 + days Total $1,750,000 $375,000 $250,000 $125,000 $2,500,000 70% 15% 10% 5% 100%

22. A/R Balance Pattern The total outstanding A/R balance at the end of March is: $595,000 = ($50,000 + $165,000 + $380,000) The estimate of cash inflows for April = 5% of April sales + 40% of March sales + 35% of February sales + 20% of January sales: Month Sales Sales Remaining A/R from Month Sales at End of March February January March April $250,000 $300,000 $400,000 $500,000 20% 55% 95% Remaining A/R as a % of Month Sales $50,000 $165,000 $380,000 Estimated April inflows = (0.05 x $500,000) + (0.40 x $400,000) + (0.35 x $300,000) + (0.20 x $250,000) = $340,000