Cash Collections

hoangvu90

What was this formula again?

Something like Cash Collections = Sales - Increase in A/R + Increase in Unearned Revenue?

yodacaia

so what was the adjustment for write-offs? i think i got something close to 3.

wilslm

Should be 65..

mp3bu

Think about this one people. An allowance for doubtful accounts, one that the business did not have a good grasp on measuring effectively, is therefore a bad debt and no longer a receivable.

maryli

When you write off receivables do you have to make any changes to the above equation?

MiniMe7

Bump, could someone explain this last part to me please? Impact of writing off receivables on the cash collections equation, or is there no impact at all.

Thank you

jacksparrow

it is in cfai book earnings quality

my understanding:
net ar (net of allowance) you remove allowance (the change of allowance is important if increased you need to increase change of ar) to get gross

then you need to put back write-off which I believe is flow value, amount written off in a year you add to ar

so change in net ar + change in allowance + write-off of the year = non cash result of revenues

revenues - this non cash + increase in defered revenue = cash collection

not 100% sure, pls correct

lucasg85

Yes, or - decrease in unearned revenue.