NETTING Definition

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NETTING can be the settling of mutual obligations at the net value of a contract as opposed to its gross dollar value; or, the reduction of transfers of funds between subsidiaries or separate companies to a net amount.

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COLLECTION PERIOD (Period End) is used to appraise accounts receivable (AR). This ratio measures the length of time it takes to convert your average sales into cash. This measurement defines the relationship between accounts receivable and cash flow. A longer average collection period requires a higher investment in accounts receivable. A higher investment in accounts receivable means less cash is available to cover cash outflows, such as paying bills. NOTE: Comparing the two COLLECTION PERIOD ratios (Period Average and Period End) suggests the direction in which AR collections are moving, thereby giving an indication as to potential impacts to cash flow. Formula: AR (current) / (Net Revenue / 365)

STANDARD OF VALUE is the identification of the type of value being utilized in a specific engagement; e.g. fair market value, fair value, investment value.

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