Trade credit created by a company when it permits a client to pay in the future for goods or services that have already been delivered by the company. A client company is generally required to arrange payment within 7 to 180 days, though in some cases terms may extend even further. In exchange for granting the payment extension, the company implicitly or explicitly charges its customers a financing cost. Receivables granted in the normal course of business are routinely sold to third parties on a nonrecourse basis (FACTORING) or used as COLLATERAL to secure funding (FINANCING); in some cases they are repackaged and sold through a SECURITIZATION. See also ACCOUNTS PAYABLE.
What is ACCOUNTS RECEIVABLE?
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