Reading Financial Reports For Dummies
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Any company that allows its customers to buy on credit has an accounts receivable line on its balance sheet. On a financial report, accounts receivable is a collection of individual customer accounts listing money that customers owe the company for products or services they've already received.

A company must carefully monitor not only whether a customer pays, but also how quickly she pays. If a customer makes her payments later and later, the company must determine whether to allow her to get additional credit or to block further purchases.

Although the sales may look good, a nonpaying customer hurts a company because she's taking out — and failing to pay for — inventory that another customer could've bought. Too many nonpaying or late-paying customers can severely hurt a company's cash-flow position, which means the firm may not have the cash it needs to pay the bills.

Comparing a company's accounts receivable line over a number of years gives you a good idea of how well the company is doing collecting late-paying customers’ accounts. Although you may see a company report positive sales numbers and a major increase in sales, if the accounts-receivable number is also rising rapidly, the business may be having trouble collecting the money on those accounts.

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Lita Epstein, who earned her MBA from Emory University’s Goizueta Business School, enjoys helping people develop good financial, investing and tax-planning skills.
While getting her MBA, Lita worked as a teaching assistant for the financial accounting department and ran the accounting lab. After completing her MBA, she managed finances for a small nonprofit organization and for the facilities management section of a large medical clinic.
She designs and teaches online courses on topics such as investing for retirement, getting ready for tax time and finance and investing for women. She’s written over 20 books including Reading Financial Reports For Dummies and Trading For Dummies.
Lita was the content director for a financial services Web site, MostChoice.com, and managed the Web site, Investing for Women. As a Congressional press secretary, Lita gained firsthand knowledge about how to work within and around the Federal bureaucracy, which gives her great insight into how government programs work. In the past, Lita has been a daily newspaper reporter, magazine editor, and fundraiser for the international activities of former President Jimmy Carter through The Carter Center.

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