Kathleen has hired you as an outside consultant to advise her about receivables management. So far, you have developed a model that produces accounts receivable balances, average collection period (ACP), aging schedules, uncollected balances schedules, and quarterly carrying costs for the end of March and the end of June. The uncollected balances schedule permits managers to remove the effects of seasonal and cyclical sales variation and to construct an accurate measure of receivables payment patterns. Thus, it provides financial managers with better aggregate information than do such crude measures as the ACP or aging schedule. Kathleen anticipates that the venture capitalists at the conference will ask some questions concerning the interpretation of the receivables data, the sensitivity of the results to the basic assumptions, and the strategies to reduce carrying costs of receivables.
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