Net Receivables
Net receivables are the amount of money a company is owed by its customers after deducting any allowances or discounts. It is calculated by taking the total amount of receivables and subtracting any allowances or discounts.
Net receivables are an important indicator of a company's financial health. A high level of net receivables can indicate that a company is having difficulty collecting its debts, which can lead to cash flow problems. A low level of net receivables can indicate that a company is collecting its debts quickly, which is a sign of good financial health.
Net receivables are also used to calculate a company's working capital. Working capital is the amount of money a company has available to fund its day-to-day operations. It is calculated by taking the current assets of a company and subtracting its current liabilities.
The formula for net receivables is:
Net receivables = Total receivables - Allowances - Discounts
Where:
- Total receivables is the total amount of money a company is owed by its customers.
- Allowances are amounts that are deducted from receivables to account for bad debts.
- Discounts are amounts that are deducted from receivables to account for discounts that are offered to customers.
Net receivables are an important part of financial analysis. They can be used to assess a company's financial health and to calculate its working capital.