<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>One of the most important aspects of operational financial management is related to the management of the working capital of enterprises. A significant portion of this capital is invested in trade receivables, which are obtained from deferred sales. On the one hand, nowadays trade credit has a stimulating effect on customer purchases, but on the other hand, incorrect assessment of the creditworthiness of customers and the risk of non-payment (default risk) can negatively affect the financial condition of the enterprise and lead to chain bankruptcies. In the specialized literature on company finance management, the problems of working capital management and risk management of trade receivables are considered in detail. However, the question of the complex assessment of the creditworthiness of customers and the decision on the optimal credit limit remains to some extent insufficiently developed. Summarizing the following key components considered in the literature – 1) overall economic situation, ownership, management and strategy of the company; 2) its revenue and profitability; 3) liquidity and financial leverage; 4) cash flow and turnover, this article focuses on developing and demonstrating the application of an approach to assess the financial condition of customers, to make an adequate decision on credit limit and to avoid the risk of non-payment of commercial loans. The article also presents the results of a descriptive statistical analysis regarding some key financial indicators of Bulgarian enterprises, the credit limits requested by them and the results of applying the presented model.</p>
</abstract>

One of the most important aspects of operational financial management is related to the management of the working capital of enterprises. A significant portion of this capital is invested in trade receivables, which are obtained from deferred sales. On the one hand, nowadays trade credit has a stimulating effect on customer purchases, but on the other hand, incorrect assessment of the creditworthiness of customers and the risk of non-payment (default risk) can negatively affect the financial condition of the enterprise and lead to chain bankruptcies. In the specialized literature on company finance management, the problems of working capital management and risk management of trade receivables are considered in detail. However, the question of the complex assessment of the creditworthiness of customers and the decision on the optimal credit limit remains to some extent insufficiently developed. Summarizing the following key components considered in the literature – 1) overall economic situation, ownership, management and strategy of the company; 2) its revenue and profitability; 3) liquidity and financial leverage; 4) cash flow and turnover, this article focuses on developing and demonstrating the application of an approach to assess the financial condition of customers, to make an adequate decision on credit limit and to avoid the risk of non-payment of commercial loans. The article also presents the results of a descriptive statistical analysis regarding some key financial indicators of Bulgarian enterprises, the credit limits requested by them and the results of applying the presented model.

Some Aspects in Trade Recеivables Assessment

St. Cyril and St. Methodius University of Veliko Tarnovo

Proceedings of the International Conference on Business Excellence

This work is licensed under the Creative Commons Attribution 4.0 International License.

{"article-title":"Some Aspects in Trade Recеivables Assessment"}

One of the most important aspects of operational financial management is related to the management of the working capital of enterprises. A significant portion...

Some Aspects in Trade Recеivables Assessment

Publié en ligne: 03 juil. 2024

Pages: 2086 - 2099

DOI: https://doi.org/10.2478/picbe-2024-0176

Mots clés
trade receivables, trade receivables assessment, buyer’s non-payment risk, trade credit, trade credit management, credit limit

© 2024 Marinela Ilieva et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Some Aspects in Trade Recеivables Assessment

Publié en ligne: 03 juil. 2024

Pages: 2086 - 2099

DOI: https://doi.org/10.2478/picbe-2024-0176

Mots cléstrade receivables, trade receivables assessment, buyer’s non-payment risk, trade credit, trade credit management, credit limit

© 2024 Marinela Ilieva et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Mots clés
trade receivables, trade receivables assessment, buyer’s non-payment risk, trade credit, trade credit management, credit limit