Receivables are an element of circulating capital, i.e. a due amount to be paid to organization by legal entities and individuals. Virtually, the receivables are similar to bills of exchange or promissory notes trading on the stock market.
Generally, the receivables appraisal is required for company’s financial efficiency studies; assignment of receivables; distrainment.
In the course of receivables appraisal the following shall be taken into account: debtor financial status, availability of security agreement, right to demand performance that forms the basis for receivables calculation, potential demand for receivables.
When appraising the receivables, it should be understood that when the receivables amount to 30% of the company’s balance sheet assets they may have significant effect on the company’s economical performance results and on the market value of the company’s business (shares, assets, etc.).
The receivables appraisal is required in the following events:
· company’s financial efficiency studies;
· assignment of receivables;
· legal proceedings pertaining to resolution of property disputes and distrainment.