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Hello,
I am learning about the Working capital at the moment. I am not sure that I understand what they mean by saying “to finance receivables” (WC financing). I mean I understand that a company needs to find funds to finance Cash account and Inventory (purchase/production of it) if customers pay on credit so they don’t get money from the operations immediately. Could you please help me with understanding of the receivables part?
Thank you in advance.
Hi,
Yes, it is saying that it we are offering credit to a customer then we are without the cash until they pay the invoiced amount. In that period where we are without cash we need to ensure that we have the finance to operate whilst without cash, hence the term financing receivables.
Hope this helps.
Thanks
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