Chapter 7

days to collect receivables formula

365 (Days) / accounts receivable turnover ratio.

Maturity date

The date on which the maker must repay the principal and make the final interest payment to the payee.

days to collect receivables

a measure of the average number of days to collect accounts receivable

Principal

amount of money loaned by the payee to the maker of the note

collateral

assets belonging to the maker that are assigned as security to ensure that the principal and interest will be paid when due

Interest

economic benefit earned by the payee for loaning the principal to the maker.

accounts receivable turnover

how long it takes a company to collect it's accounts receivable.

A promissory note contains these features

maker, payee, principal, interest, maturity date, collateral

Maker/ Borrower

person responsible for making payments on the due date

Payee

person to whom the note is made payable to.

interest formula

principal x rate x time

accounts receivable turnover formula

sales/net accounts receivable