University:
Swansea University
Course:
FIN520 | Financial Ethics and Accountability
Academic year:

2023
Views:

377

Pages:

1
Author:

Maria C.

Lecture Notes Title: “Decoding Business Credit Dynamics: Transactions, Financing, and Investments" 1. Credits for Operations: When Transactions Lead to Debts • Definition: Credits for operations arise when a company sells goods or services with deferred payment or purchases goods and services with advance payment. • Selling with Deferred Payment: • This results in a natural outflow of goods or services (e.g., shipping of products). • • The credit is extinguished when the payment is received. Buying with Advance Payment: • An advance payment leads to a cash outflow (the amount paid in advance to the supplier). • The contract execution involves the delivery of goods or the performance of services, ultimately extinguishing the credit. 2. Transactions as a Financing Mechanism • Financial Implications of Sales and Purchases: • Business transactions can serve as a form of financing. 3. Investments and Financing Related to Sales and Purchases • Relationship with Customers: Investments and Financing • a) Customers: • Investments: Accounts Receivable (Credits from Customers) • Arise when the company sells goods or services with deferred payment. • The company temporarily finances its customers for the period between delivery and the collection of invoices. • Financing: Accounts Payable (Debts to Customers) • Arise when the company sells goods or services with advance payment. • The company is temporarily financed by its customers for the period between the advance payment and the delivery of goods or services.