Kathleen has hired you as an outside consultant to advise her about receivables management. So far, you
have developed a model that produces accounts receivable balances, average collection period (ACP),
aging schedules, uncollected balances schedules, and quarterly carrying costs for the end of March and
the end of June. The uncollected balances schedule permits managers to remove the effects of seasonal
and or cyclical sales variation and to construct an accurate measure of receivables payment patterns.
Thus, it provides financial managers with better aggregate information than do such crude measures as
the ACP or aging schedule. Kathleen anticipates that the venture capitalists at the conference will ask
some questions concerning the interpretation of the receivables data, the sensitivity of the results to the
basic assumptions, and the strategies to reduce carrying cost of receivables.