Skip to ContentGo to accessibility pageKeyboard shortcuts menu
OpenStax Logo

accounts receivable aging schedule
a report that shows amounts owed by customers by the age of the account, as measured by the number of days since the sale
allowance for doubtful accounts
an account that contains the estimated amount of accounts receivable that will not be collected
bad debt expense
an expense that a business incurs as a result of uncollectible accounts receivables
federal court procedures that protect distressed businesses from creditor collection efforts while allowing the debtor firm to liquidate its assets or devise a reorganization plan
the process of performance analysis that involves comparing financial condition and operating results against a standard, called a benchmark
bill of lading
a document that is a detailed list of a goods that have been shipped; a receipt given by the carrier (shipping company) to the seller as evidence that the goods have been shipped to the buyer
carrying costs
all costs associated with having inventory in stock including storage costs, insurance, inventory obsolescence, and spoilage
cash budget
a report that shows an estimation of cash inflows, outflows, and cash balances over a specific period of time, such as monthly, quarterly, or annually
cash cycle or cash conversion cycle
the time period (measured in days) between when a business begins production and acquires resources from its suppliers (for example, acquisition of materials and other forms of inventory) and when it receives cash from its customers; offset by the time it takes to pay suppliers (called the payables deferral period)
cash discount
discount granted to a customer who has purchased goods or services on account (credit) and pays the invoice within a certain number of days as specified by credit terms
compensating balance
minimum balance of cash that a business must deposit and maintain in a bank account to obtain a loan
an account with a balance that is used to offset (reduce) its related asset on the balance sheet (for example, allowance for doubtful accounts reduces the value of accounts receivable reported on the balance sheet)
credit period
the number of days that a business purchaser has before they must pay their invoice
credit rating
a type of score that indicates a business’s creditworthiness
credit terms
the terms that are part of a sales credit agreement that indicate when payment is due, possible discounts, and any fees that will be charged for a late payment
current assets
assets that are cash or cash equivalents or are expected to be converted to cash in a short period of time and will be consumed, used, or expire through business operations within one year or the business’s operating cycle, whichever is shorter
discount period
the number of days the buyer has to take advantage of the cash discount for an early payment
the process of selling accounts receivables to a financial institution or, in some cases, using the accounts receivables as security for a loan from a financial institution
floor planning
a type of inventory financing whereby a financial institution provides a loan so that the company can acquire inventory with proceeds from the sale of inventory used to pay down the loan; a common method of financing inventory for automobile dealers and sellers of other big-ticket (high-priced) items
gross working capital
synonymous with the current assets of a company, those assets that include cash and other assets that can be converted into cash within a period of 12 months
just-in-time inventory
inventory management method in which a company maintains as little inventory on hand as possible while still being able to satisfy the demands of its customers
letter of credit
a letter issued by a bank that is evidence of a guarantee for payments made to a specified entity (such as a supplier) under specified conditions; common in international trade transactions
ability to convert assets into cash in order to meet primarily short-term cash needs or emergencies
marketable securities
investments that can be converted to cash quickly; short-term liquid securities that can be bought or sold on a public exchange (market) and tend to mature in a year or less
net terms
also referred to as the full credit period; the number of days that a business purchaser has before they must pay their invoice
net working capital
the difference between current assets and current liabilities (Current Assets – Current Liabilities = Net Working Capital)
operating cycle
the time it takes a company to acquire inventory, sell inventory, and collect the cash from the sale of said goods; synonymous with cash cycle
opportunity cost
the cost of a forgone opportunity
ordering costs
costs associated with placing an order with a vendor or supplier
precautionary motive
a reason to hold cash balances for unexpected expenditures such as repairs, costs associated with unexpected breakdown of equipment, and hiring temporary workers to meet unexpected production demands
quick payment
a payment made on an account payable during a period of time that falls within the discount period
numerical values taken from financial statements that are used in formulas to examine financial relationships and create metrics of performance, strengths, weaknesses; help analysts gain insight and meaning
speculative motive
a reason for holding an amount of cash—to be able to take advantage of investment opportunities
stockout costs
an opportunity cost (lost revenue) incurred when a customer order cannot be filled because the item is out of stock and the customer goes elsewhere for the product
supply chain
the network of participants and activities between a company and its suppliers and the company and its customers; exists to distribute a product or to provide a service to the final buyer
trade credit
credit granted to a business, also called accounts payable; allows a business to buy goods and services on account and pay the cash at some point in the future
transactional motive
holding an amount of cash to meet operational expenditures such as payroll, payments to vendors, and loan payments
working capital
the resources that are needed to meet the daily, weekly, and monthly operating cash flow needs
Order a print copy

As an Amazon Associate we earn from qualifying purchases.


This book may not be used in the training of large language models or otherwise be ingested into large language models or generative AI offerings without OpenStax's permission.

Want to cite, share, or modify this book? This book uses the Creative Commons Attribution License and you must attribute OpenStax.

Attribution information
  • If you are redistributing all or part of this book in a print format, then you must include on every physical page the following attribution:
    Access for free at
  • If you are redistributing all or part of this book in a digital format, then you must include on every digital page view the following attribution:
    Access for free at
Citation information

© Jan 8, 2024 OpenStax. Textbook content produced by OpenStax is licensed under a Creative Commons Attribution License . The OpenStax name, OpenStax logo, OpenStax book covers, OpenStax CNX name, and OpenStax CNX logo are not subject to the Creative Commons license and may not be reproduced without the prior and express written consent of Rice University.