Receivable Period Essay
Receivable Period, 435 words essay example
Essay Topic: time, advantage, source, customer
Receivables days tells the time taken by the customer to clear unsettled transaction or monetary obligation owed to a company.
The shorter the receivable days the better it is as investment in receivable has cost. An additional cost of irrecoverable debt expense has to be incurred if amount owed to the company is not received.
In 2013 Apple offer receivable days of 28 which increase to 35 days in 2014 with further decreasing to 26 days in 2015.This shows that management does not have consistent policy however it should be compared with the industry average. On the other hand Samsung had no receivable days in 2013. In 2014 the receivable days offered were 51 days and in 2015 reduce to 49 days. This shows that Samsung offer more credit period to its customers and this may be advantageous for the company as customers would prefer to buy the product from the company that offers greater credit period.
Payables days explain the time taken by the company to pay the supplier. The longer the payable period the better as it is a short term free source of finance, however it may severely damage the relationship with the supplier as supplier may refuse to offer credit term and ask for cash on purchases. It also indicates company ability to pay the creditors so it is necessary to manage payables effectively and take advantage of early settlement discount. Apple plc has payables day of 77 in 2013. It rises to 98 days in 2014 and slightly decreases in 2015 to 92 days while Samsung had payable days of 53 in 2013 increasing to 54 days and further decreasing to 28.41days. The result shows that Samsung had enough cash resources available to meets its liabilities as they fall due whereas apple took long enough to pay suppliers which could deteriorate relationship with the supplier.
RISK ASSESSMENT (SOLVENCY ANALYSIS)
2013 2014 2015 2013 2014 2015
Gearing % 14 32 54 8.0 9.0 7.0
EPS 1.19 1.43 1.97 49.34 26.47 30.08
PE ratio 12.02 15.67 11.99 7.00 7.14 9.38
DPS 0.44 0.47 0.52 0.00 0.00 0.00
The gearing ratio is the debt to equity ratio. It tells that how much company 's capital structure comprises of debt or equity, however as gearing increase the company become more susceptible to solvency as higher the gearing make shareholders concern because debt take priority to equity and interest payment are legal commitments whereas dividend on equity is not compulsory.
In 2013 the debt to equity ratio of Apple was 14% which further rises to 32% in 2014 and increasing to 54% in 2015. Samsung on other hand have debt to equity ratio of 8% in 2013 increasing further to 9% finally decreasing to 7%. The result shows that apple gearing was much better than the competitor. This ratio is helpful to analyze how much lenders, suppliers, creditors and obligators have committed to the company as compared to shareholders equity.