The Influence Of Bad Debt Reserves On Financial Health Of Organizations

Abstract :

The current financial instability and a threat of a deepening international crisis mean that many companies often face inability of their debtors to pay for the services or goods on time, which in the end hurts financial indicators and management effectiveness of the organization. If an organization avoids regular assessment of its accounts receivable, account them without reserves, the financial result of such a company becomes rigged. Our research reveals the advantages and disadvantages of bad debt reserves, studies the problems of these reserves financing, establish the difference in the use of the reserve in bookkeeping and tax accounting. Accounts receivable are the most important part of a company’s working capital; liquidity, margins and investment attractiveness of the company depends on it. This is why the results of our research will help companies to put correct focuses when analyzing its activities.