Why is it important to closely monitor the company

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Reference no: EM133433763

Overview: These problems are meant to encourage deeper thinking on the material presented in the textbook. You are to answer ALL questions presented in the problem using the knowledge you have gained throughout the textbook. However, do not simply repeat what is in the book. Use that information and interpret it the best you can to apply it to the situation.

Requirements: Review the information and questions below. Provide a detailed explanation on how you would solve the problem or issue, based not only on the readings in the chapter, but your own personal experience and/or any additional outside research you perform. If quoting a source directly, make sure to cite that source, but do not rely solely on quoted materials.

Issue: You have been hired as the accounting manager of Taylor, Inc., a provider of custom furniture. The company recently switched its method of paying its salespeople from a straight salary to a commission basis in order to encourage them to increase sales. The salespeople receive ten percent of the sales price at the time of the sale. You have noticed that the company's accounts receivable balance is growing because the salespeople are granting more credit to their customers

Question

Why is it important to closely monitor the company's accounts receivable balance?

Why could a large balance lead to cash flow problems?

Reference no: EM133433763

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