Question

Explain the costs associated with maintaining receivables smu

Answer 1

The costs associated with maintaining receivables are as follows :-

• First comes the cost of financing receivables  which allowed the customers to use the shareholders fund.
• It also involves the cost of collection-Which is the cost incurred as reminders .
• Bad debts are also a part of these that means some customers fails to pay the money.

Answer 2

Cash discount helps to reduce the costs of maintaining receivables. Thus discount cost does not constitute cost of maintaining receivables.