What are the benefits of maintaining receivables?

1. Increase in Sales

Except a few monopolistic firms, most of the firms are required to sell goods on credit, either because of trade customers or other conditions. The sales can further be increased by liberalizing the credit terms. This will attract more customers to the firm resulting in higher sales and growth of the firm.

2. Increase in Profits

Increase in sales will help the firm to easily recover the fixed expenses and attaining the break-even level, and also increase the operating profit of the firm. In a normal situation, there is a positive relation between the sales volume and the profit.

3. Extra Profit

Sometimes, the firms make the credit sales at a price which is higher than the usual cash selling price. This brings an opportunity to the firm to make extra profit over and above the normal profit.

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