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Working Capital Management$
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Lorenzo Preve and Virginia Sarria-Allende

Print publication date: 2010

Print ISBN-13: 9780199737413

Published to Oxford Scholarship Online: May 2010

DOI: 10.1093/acprof:oso/9780199737413.001.0001

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Managing Account Receivables

Managing Account Receivables

(p.71) 6 Managing Account Receivables
Working Capital Management

Lorenzo A. Preve (Contributor Webpage)

Virginia Sarria-Allende (Contributor Webpage)

Oxford University Press

In this chapter, we discuss trade receivables and credit risk. We begin by providing a brief review of the main theories of trade credit. Next, we consider the credit risk embedded in firms' investment in trade receivables, and discuss how to correctly assess and manage the credit risk inherent in clients' trade credit. We continue by presenting several tools that can help creditors mitigate the effects of clients' defaults. Then, we focus on alternative mechanisms that allow firms to specifically finance their investment in clients, namely, factoring and the issuance of collateralized debt. Finally, we briefly review how trade credit can be measured.

Keywords:   corporate finance, working capital management, trade credit policy, trade credit management, accounts receivables

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