Financial Terms
Notes receivable

Main Page



Information about financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit.


Main Page: financial, stock trading, credit, investment, financial advisor, accounting, business, money,

Definition of Notes receivable

Notes Receivable Image 1

Notes receivable

Amounts owed to the company that have been formalized by a legal agreement called a note.


notes receivable are promissory notes that the company has accepted from its debtors. Most promissory notes pay interest. Those that are due within a year are shown under “Current Assets.” Those that mature in more than a year would be listed under “Long-term Assets.” If a note is being
collected in installments, the payments due within the next twelve months are shown as a current asset, and the remainder is shown as a long-term asset.

Related Terms:


A ratio that shows how well a company could pay its current debts using only its most liquid or “quick” assets. It’s a more pessimistic—but also realistic—measure of safety than the current ratio, because it ignores sluggish, hard-toliquidate current assets like inventory and notes receivable. Here’s the formula:
(Cash + Accounts receivable + Marketable securities) / (Current liabilities)

Accounts receivable

Money owed by customers.


Amounts owed to a company by customers that it sold to on credit. Total accounts receivable are usually reduced by an allowance for doubtful accounts.

Accounts receivable

Amounts owed to the company, generally for sales that it has made.

accounts receivable

Short-term, non-interest-bearing debts owed to a
business by its customers who bought goods and services from the business
on credit. Generally, these debts should be collected within a month
or so. In a balance sheet, this asset is listed immediately after cash.
(Actually the amount of short-term marketable investments, if the business
has any, is listed after cash and before accounts receivable.)
Accounts receivable are viewed as a near-cash type of asset that will be
turned into cash in the short run. A business may not collect all of its
accounts receivable. See also bad debts.

Accounts receivable

A current asset on the balance sheet, representing short-term
amounts due from customers who have purchased on account.

Notes Receivable Image 2

Accounts Receivable

Amounts due from customers for sales on open account, not evidenced
by a signed note.

Accounts Receivable

Money owed to a business for merchandise or services sold on open account.

Accounts Receivable Days (A/R Days)

The number of days it would take to collect the ending
balance in accounts receivable at the year's average rate of revenue per day. Calculated as
accounts receivable divided by revenue per day (revenue divided by 365).

Accounts receivable turnover

The ratio of net credit sales to average accounts receivable, a measure of how
quickly customers pay their bills.

accounts receivable turnover ratio

A ratio computed by dividing annual
sales revenue by the year-end balance of accounts receivable. Technically
speaking, to calculate this ratio the amount of annual credit sales should
be divided by the average accounts receivable balance, but this information
is not readily available from external financial statements. For
reporting internally to managers, this ratio should be refined and finetuned
to be as accurate as possible.

Average age of accounts receivable

The weighted-average age of all of the firm's outstanding invoices.

Average collection period, or days' receivables

The ratio of accounts receivables to sales, or the total
amount of credit extended per dollar of daily sales (average AR/sales * 365).

BAN (Bank anticipation notes)

notes issued by states and municipalities to obtain interim financing for
projects that will eventually be funded long term through the sale of a bond issue.

Days in receivables

Average collection period.

Notes Receivable Image 3

Demand master notes

Short-term securities that are repayable immediately upon the holder's demand.

Discounting of Accounts Receivable

Short-term financing in which accounts receivable are used as collateral to secure a loan. The lender does not buy the accounts receivable but simply uses them as collateral for the loan. Also called pledging of accounts receivable.

Documented discount notes

Commercial paper backed by normal bank lines plus a letter of credit from a
bank stating that it will pay off the paper at maturity if the borrower does not. Such paper is also referred to as
LOC (letter of credit) paper.

Extendable notes

Note the maturity of which can be extended by mutual agreement of the issuer and

Money market notes

Publicly traded issues that may be collateralized by mortgages and MBSs.

Municipal notes

Short-term notes issued by municipalities in anticipation of tax receipts, proceeds from a
bond issue, or other revenues.

Notes payable

Amounts owed by the company that have been formalized by a legal document called a note.

Notes to the financial statements

A detailed set of notes immediately following the financial statements in
an annual report that explain and expand on the information in the financial statements.


(also called average collection period). The number of days of net sales that are tied up in credit sales (accounts receivable) that haven’t been collected yet.

Project notes (PNs)

Project notes are issued by municipalities to finance federally sponsored programs in
urban renewal and housing and are guaranteed by the U.S. Department of Housing and Urban Development.
Project financing A form of asset-based financing in which a firm finances a discrete set of assets on a standalone
Projected benefit obligation (PBO) A measure of a pension plan's liability at the calculation date assuming
that the plan is ongoing and will not terminate in the foreseeable future. Related:accumulated benefit obligation.

Receivables balance fractions

The percentage of a month's sales that remain uncollected (and part of
accounts receivable) at the end of succeeding months.

Receivables turnover ratio

Total operating revenues divided by average receivables. Used to measure how
effectively a firm is managing its accounts receivable.

TANs (tax anticipation notes)

Tax anticipation notes issued by states or municipalities to finance current
operations in anticipation of future tax receipts.

Treasury notes

Debt obligations of the U.S. Treasury that have maturities of more than 2 years but less than 10 years.

Unbilled Accounts Receivable

Revenue recognized under the percentage-of-completion
method in excess of amounts billed. Also known as cost plus estimated earnings in excess of







Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit.

Copyright© 2018