Sterling Construction Company Accounts Receivables 2011-2026 | STRL

Accounts receivable — is the amount of money owed to a company by other organizations, individuals, or the government. It arises when a company has already delivered goods, performed work, or provided services, but has not yet received payment for them.

• Customers have not paid invoices for delivered products
• An advance has been paid to a supplier, but goods have not yet been received
• Employees have not reported on accountable amounts
• The government must refund tax overpayments
• Outstanding loans issued

1. Asset quality
   Accounts receivable are part of current assets. But they are not cash — they are promises. Investors assess how realistic these promises are to be collected. The higher the share of overdue or doubtful receivables, the greater the risk of asset impairment.
2. Impact on cash flow
   Even if a company shows a profit, the money can be "tied up" in receivables. This means profit does not turn into actual cash, and the company may face liquidity shortages.
3. Assessment of management efficiency
   The following accounts receivable turnover ratios are commonly used:
   Receivables turnover = Revenue / Average accounts receivable
   (the higher — the better)
   
   Days Sales Outstanding (DSO) = 365 / Turnover
   (the fewer days — the faster customers pay)
   
   If the DSO is constantly increasing — this is a red flag — customers are delaying payments, and money gets stuck in settlements.