Gentry-De La Garza Model


DEFINITION of 'Gentry-De La Garza Model'

A different way of managing account receivables, proposed by college professors James A. Gentry and Jesus M. De La Garza in the mid-1980s. The Gentry-De La Garza model gives three reasons as to why accounts receivable balances may increase: sales pattern effects, collection experience effects and joint effect. Together they equal the difference between the receivables balances and allow companies to increase the speed of cash inflows and reduce the speed of cash outflows

BREAKING DOWN 'Gentry-De La Garza Model'

Because it separates receivables into three quantifiable categories, the Gentry-De La Garza model allows financial managers to instantly detect whether an increase in receivables is due to rising sales levels or faulty credit controls. Eroding collections may be a sign that the company is not forceful or persistent enough in collecting overdue accounts or that credit is being granted too freely. Being able to recognize these issues right away helps a company refine its processes and become more efficient.

  1. Progress Billings

    A series of invoices prepared at different stages in the process ...
  2. Accounts Receivable Subsidiary ...

    An accounting ledger that shows the transaction and payment history ...
  3. Accounts Receivable (A/R) Discounted

    Outstanding invoices representing money owed to a creditor which ...
  4. Cash Management

    The corporate process of collecting, managing and (short-term) ...
  5. Accrual Accounting

    Accrual accounting is an accounting method that measures the ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to ...
Related Articles
  1. Professionals

    Career Advice: Accountant Vs. Financial Planner

    Identify the key differences between a career in accounting and financial planning, and learn how your personality dictates which is the better choice for you.
  2. Economics

    Calculating Days Working Capital

    A company’s days working capital ratio shows how many days it takes to convert working capital into revenue.
  3. Options & Futures

    Pick 401(k) Assets Like A Pro

    Professionals choose the options available to you in your plan, making your decisions easier.
  4. Professionals

    Career Advice: Accountant Vs. Controller

    Learn about the differences between controllers and accountants, how the two are related and which is the best career choice for aspiring bookkeepers.
  5. Investing

    What is EBITA?

    EBITA measures a company’s full profitability before reducing it by interest, taxes and amortization considerations, and so is useful for calculating a company’s internal efficiency or profitability ...
  6. Professionals

    What is Cash Basis Accounting?

    Cash basis accounting recognizes revenues and expenses at the time cash is paid or received.
  7. Term

    What Is Financial Performance?

    Financial performance measures a firm’s ability to generate profits through the use of its assets.
  8. Entrepreneurship

    What's a Good Profit Margin for a Mature Business?

    How to determine if the amount you clear dovetails with the competition.
  9. Investing

    How to Effectively Monitor Your Stock Holdings

    Investors should concentrate on the business, not the stock price.
  10. Professionals

    How to Launch a Wealth Management Firm

    Opening a wealth management firm is a complex process. By keeping these rules in mind, financial advisors can increase the odds of success.
  1. Does working capital include prepaid expenses?

    The calculation for working capital includes any prepaid expenses that are due within one year, since such prepaid expenses ... Read Full Answer >>
  2. How do I read and analyze an income statement?

    The income statement, also known as the profit and loss (P&L) statement, is the financial statement that depicts the ... Read Full Answer >>
  3. Does working capital include short-term debt?

    Short-term debt is considered part of a company's current liabilities and is included in the calculation of working capital. ... Read Full Answer >>
  4. Do dividends affect working capital?

    Regardless of whether cash dividends are paid or accrued, a company's working capital is reduced. When cash dividends are ... Read Full Answer >>
  5. Do prepayments provide working capital?

    Prepayments, or prepaid expenses, are typically included in the current assets on a company's balance sheet, as they represent ... Read Full Answer >>
  6. Does working capital include inventory?

    A company's working capital includes inventory, and increases in inventory make working capital increase. Working capital ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  2. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  3. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  4. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  5. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  6. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!