Trade Receivables (Definition, Example) | How it Works?

In this video on Trade Receivables, here we study definition, how it works, examples and why trade receivables are critical to corporate liquidity.

𝐓𝐫𝐚𝐝𝐞 𝐑𝐞𝐜𝐞𝐢𝐯𝐚𝐛𝐥𝐞𝐬 𝐌𝐞𝐚𝐧𝐢𝐧𝐠
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Trade Receivables is the accounting entry in an entity's balance sheet that arises from the Entity's sale of goods and services to its credit customers.

𝐓𝐫𝐚𝐝𝐞 𝐑𝐞𝐜𝐞𝐢𝐯𝐚𝐛𝐥𝐞𝐬 𝐄𝐱𝐚𝐦𝐩𝐥𝐞
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XYZ Corporation is a manufacturer of electrical equipment. It recorded sales of USD 100 billion in FY18, with 30% sales on credit to Corporate Customers.

In its balance sheet, the trade receivables accounting entry for the transaction will be as follows:

Particulars Billion USD

Total Sales in FY18 100
Credit Sales 40%
Accounts Receivables / Trade $40
Receivables

𝐂𝐚𝐬𝐡 𝐂𝐨𝐧𝐯𝐞𝐫𝐬𝐢𝐨𝐧 𝐂𝐲𝐜𝐥𝐞
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#1 - Cash conversion cycle is the number of days a company takes to convert its inventory into cash.

#2 - The cash conversion cycle is one of most key metrics we look at while analyzing Firms ' liquidity positions.

To know more about 𝐓𝐫𝐚𝐝𝐞 𝐑𝐞𝐜𝐞𝐢𝐯𝐚𝐛𝐥𝐞𝐬, you can go to this 𝐥𝐢𝐧𝐤 𝐡𝐞𝐫𝐞:- https://www.wallstreetmojo.com/trade-...

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