1.

Why are the reporting and control of the receivables important to the investors and how can the
information be determined by the financial statements?

Investors value receivables because this asset has the fastest turn around as far as cash flow goes.
Investors can use financial statements to determine the speed in which a company is collecting the cash
due to them and assess the financial health of it.

2. What ratio would both the management, creditors and investors use to evaluate how well the
receivables are being controlled?

the age of receivables equation

3. Why are receivables and inventory important assets to the firm and why are they closely
monitored by both the internal and external groups associated with the firm?

Receivables and inventory are important pieces of information both internally and externally because it
indicates how well the company is doing. The faster receivables are being paid, the better because cash
is needed to continue to operate the business and grow.

4. What analysis techniques are used by the firm and external parties to determine the effectiveness
of both inventory and receivables?

Aging of receivables is one analysis technique. The longer a company goes without collecting, the less
likely it is that they will be paid.