Purpose of Receivables

There a 3 purposes of investing or maintaining Receivables.

(1) Growth in Sales:-

In comparison to cash sales, firm can make high sales by selling on credit, because many customers do not want to pay cash. Some of the customers may have deficit of cash. Therefore, if any firm does not sell on credit, it sales may go down.

(2) Increased Profits:-

Due to credit sale of goods and services, the total sales of business can increases. As a result of it, it profits also start increasing.

(3) Meeting Competition:-

Various firm sell goods on credit to their customer only because their competitors are doing so. If a firm does not follow credit policy of it competitors, its total sales will decrease because its customers will be attracted towards other firms.