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Which of the following demonstrates that a company is managing its receivables well?

A. the company has cash to pay its bills.
B. the company is losing interest that could be earned by investing.
C. the company has many short term loans with high interest.
D. the company is cash poor.

1 Answer

6 votes

Final answer:

A company demonstrates good receivable management by having cash available to pay its bills, indicating timely collection of receivables and efficient cash utilization.

Step-by-step explanation:

The question pertains to the management of receivables by a company. A clear indication of good receivable management is the ability of the company to have cash available to pay its bills. This ability demonstrates that the company is collecting its receivables in a timely manner, which is crucial to maintaining smooth operations and avoiding unnecessary borrowing.

Companies efficient in managing their receivables also steer clear of lost opportunities, such as earning interest on the cash that could have been invested if it wasn't tied up in receivables. Therefore, having cash on hand hints at a well-managed receivables system, as opposed to the other options which indicate problems like cash shortages or reliance on expensive short-term loans.

User Charles Okwuagwu
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