what accounts receivable can tell you
accounts receivable are an important aspect of a business s fundamental analysis accounts receivable is a current asset so it measures a company s liquidity or ability to cover short term obligations without additional cash flows fundamental analysts often evaluate accounts receivable in the context of turnover also known as the accounts receivable turnover ratio which measures the number of times a company has collected its accounts receivable balance during an accounting period further analysis would include assessing days sales outstanding dso the average number of days that it takes to collect payment after a sale has been made example of accounts receivablean example of accounts receivable includes an electric company that bills its clients after the clients receive the electricity the electric company records an account receivable for unpaid invoices as it waits for its customers to pay their bills most companies operate by allowing a portion of their sales to be on credit sometimes businesses offer this credit to frequent or special customers who receive periodic invoices the practice allows customers to avoid the hassle of physically making payments as each transaction occurs in other cases businesses routinely offer all of their clients the ability to pay after receiving the service 