Analysis of the Operation and Financial Condition of the Enterprise

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Analysis of the Operation and Financial Condition of the Enterpriseaccounts receivable management this project was successfully completed, therefore, themanagement took a decision to use the services of the factoring companies in theimplementation of any further major projects, in the result of which the amount of accountsreceivable decreased by 117 thousand CU in the period from March, 2XX9, by end of2XX9.In the use of the services of the factoring companies in project implementation theenterprise not only increased the rate of turnover of accounts receivable, but also limitedthe risk of bad debts.Payment for the use of factoring services is made up of three component parts:1. A fee for signing of the factoring contract. This amount includes the reviewof the factoring offer and the development of the contract. The factoringcontract fee for Enterprise N was within the limits of 100 and 200 CU. If inthe course of time the need arises to add other customers to the factoringagreement a further amount of 20 to 50 CU per every change to the contractmust be paid.2. Commission fee on any amounts collected from the debtor and transferredto the enterprise. The amount of the commission fee is from 0.15% to0.20% from the amount transferred.3. Interest on use of the factoring company’s amount of cash advance. Theinterest rate on use of the amount of cash in advance is specified byagreement.In making use of the situation when commercial banks, leasing companies andfactoring companies are competing among themselves and try to get as many customers aspossible there is an opportunity to go to one factoring company with the offer of anotherfactoring company by obtaining the most beneficial terms and prices for factoring services.Apart from the factoring contract which is a one-off payment upon signing of thecontract, the use of the factoring services in realisation of a project with the contractualvalue of 100 thousand CU on the condition that the building contractors have two monthsavailable for the payment of the works performed, then the costs of the factoring servicesare about 1% of the contract amount or about 1,000 CU. By taking into account thebenefits offered by the use of services of the factoring companies, the costs of the factoringservices are acceptable.Accounts receivable analysisManagement of accounts receivable includes the accounts receivable analysis. Inorder to perform the accounts receivable analysis, it is necessary to find out the followingvalues: percentage of accounts receivable from total current assets; the average debtors’ debt collection period; the average ‘age’ of debts overdue.Percentage of accounts receivable from total current assetsIn order to arrive at the figure of percentage of accounts receivable from totalcurrent assets information is needed on the amount of current assets and accounts110
Analysis of the Operation and Financial Condition of the Enterprisereceivable. All this information is summarised in Table 5.20 ‘Percentage of the EnterpriseN accounts receivable from total current assets from 31/12/2XX7 to 31/12/2XX9’.111
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Analysis of the Operation and Financial Condition of the Enterprise

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