... realise that the debtors on the balance sheet represent a very substantial and expensive consumer of capital employed. They are also now beginning to accept that in total, debtors represent an investment in the market place on which the expected return is the profit to be earned once payment has completed the sale. At the same time, like all investment, those debtors are subject to the risks arising from the effect of the economic climate on that market place. In terms of net income, a company's sales operation does no more than transfer finished stock into debtors, thereby bringing closer to reality the notional profit to be earned. That profit ceases to be notional only when the sales proceeds are in the bank. However, it is in the very process of transferring the investment from stock to debtor that additional risk is incurred to profit realisation by potential erosion arising either ...

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