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Trade receivables are amounts owed to a company by customers for goods or services provided on credit, considered assets on the balance sheet. Managing them effectively is crucial for cash flow and profitability.
Trade receivables refer to the amounts owed to a company by customers for the goods or services provided on credit. These are considered assets on the company's balance sheet as they represent the right to receive payment in the future.
For example, if a company sells products to customers on credit terms, the total outstanding amount that customers owe becomes the trade receivables of that company. Managing trade receivables effectively is crucial for maintaining a healthy cash flow and profitability.
Companies often have specific policies and procedures in place to monitor and collect trade receivables to ensure timely payment and minimize the risk of bad debts.
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