EconPapers    
Economics at your fingertips  
 

A Portfolio Management Approach in Accounts Receivable Management

Grzegorz Michalski ()

South East European Journal of Economics and Business, 2008, vol. 3, issue 2, 89-96

Abstract: The basic financial purpose of an enterprise is the maximization of its value. Trade credit management should also contribute to the realization of this fundamental aim. Many of the current asset management models that are found in financial management literature assume book profit maximization as the basic financial purpose. These book profit-based models could be lacking in what relates to another aim (i.e., maximization of enterprise value). The enterprise value maximization strategy is executed with a focus on risk and uncertainty. This article presents the consequences that can result from an operating risk that is related to purchasers using payment postponement for goods and/or services. The present article offers a method that uses portfolio management theory to determine the level of accounts receivable in a firm. An increase in the level of accounts receivables in a firm increases both net working capital and the costs of holding and managing accounts receivables. Both of these decrease the value of the firm, but a liberal policy in accounts receivable coupled with the portfolio management approach could increase the value. Efforts to assign ways to manage these risks were also undertaken; among them, special attention was paid to adapting assumptions from portfolio theory as well as gauging the potential effect on the firm value.

Keywords: Accounts receivable; Trade credit management; Incremental analysis; Value based management; Portfolio analysis (search for similar items in EconPapers)
Date: 2008
References: Add references at CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed

Downloads: (external link)
https://doi.org/10.2478/v10033-008-0018-4 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:vrs:seejeb:v:3:y:2008:i:2:p:89-96:n:9

DOI: 10.2478/v10033-008-0018-4

Access Statistics for this article

South East European Journal of Economics and Business is currently edited by Adnan Efendic, Vesna Babić-Hodović and Aziz Šunje

More articles in South East European Journal of Economics and Business from Sciendo
Bibliographic data for series maintained by Peter Golla ().

 
Page updated 2022-06-19
Handle: RePEc:vrs:seejeb:v:3:y:2008:i:2:p:89-96:n:9