Trade Credit Decision Making Based on Portfolio Management Approach
The basic financial purpose of an enterprise is maximization of its value. Trade credit management should also contribute to 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...
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| Format: | Article |
| Language: | English |
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Vilnius University Press
2007-12-01
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| Series: | Ekonomika |
| Online Access: | https://www.journals.vu.lt/ekonomika/article/view/17634 |
| Summary: | The basic financial purpose of an enterprise is maximization of its value. Trade credit management should also contribute to 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 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 operating risk related to purchasers using payment postponement for goods and I 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 the net working capital and the costs of holding and managing accounts receivables. |
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| ISSN: | 1392-1258 2424-6166 |