No dollar amounts (also called balances) are shown for the assets and operating liabilities in Figure 5.3. The amounts depend on the policies and practices of the business. The amount of the accounts receivable asset depends on the credit terms offered to the companys customers, whether most of the customers pay their bills on time, and how many customers are delinquent. For example, assume the business offers its customers one-month credit, which most take, but the companys actual collection experience is closer to five weeks, on average, because some customers pay late. In this situation the balance of its accounts receivable would be about five weeks of annual sales revenue, or approximately $5 million at the end of the year ($52 million annual sales revenue 5/52 = approximately $5 million accounts receivable). (more…)