16.5 a. Define the term average collection period (ACP). b. How is ACP used to m

Question

16.5

a. Define the term average collection period (ACP).

b. How is ACP used to monitor overall revenue cycle performance?

c. What is an aging schedule?

d. How is an aging schedule used to monitor overall revenue cycle performance?

16.6

a. What is a metric?

b. What role do metrics play in revenue cycle management?

16.9

a. What is the difference between free trade credit and costly trade   credit?

b. Should businesses use all the free trade credit that they can get? Explain your answer.

c. Should businesses use all the costly trade credit they can get? Explain your answer.

16.10

Explain briefly how healthcare providers typically obtain secured short-term financing, if such financing is needed.

Please answer all the questions above !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Explanation / Answer

Towards Part A

The average collection period is the average number of days that the receivables of a company remain outstanding.

In other words, it is the average days that the company will take to recover its dues from the people it has sold goods to on credit.

Part B

Any business would prefer that it have a shorter ACP. That is because the longer the ACP would be, the lower the amount of cash that the business would have and thus the further the delays in making new investments.

Also, if the receivables remain outstanding for a longer period of time, the probability of short recoveries tend to go up.

Part C

An aging schedule is a table that organizes all the receivables of a company in the order that they have been remaining outstanding. Generally it buckets various outstanding receivables into similar time periods. It is usually a part of Management information or it is used by banks or financial institutions who are looking to discount these receivables and pay upfront cash to the companies to ascertain the level of delinquencies in the receivables of the company.

Part D

The Aging Schedule is prepared on a periodic basis. As mentioned above, the longer the period a debt is allowed to remain outstanding, the higher the chances of short recoveries from the debtor. Thus, receivables that have remained outstanding for longer than average collection period, are promptly monitored by organizations.

Hope that helped.

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