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.

RELATED TERMS
  1. Accounts Receivable Financing

    A type of asset-financing arrangement in which a company uses ...
  2. Receivables Turnover Ratio

    An accounting measure used to quantify a firm's effectiveness ...
  3. Average Collected Balance

    The average balance of collected funds (less any uncleared or ...
  4. Average Collection Period

    The approximate amount of time that it takes for a business to ...
  5. Allowance For Doubtful Accounts

    A contra-asset account that records the portion of a company's ...
  6. Minimum Balance

    The minimum dollar amount that a customer must have in an account ...
Related Articles
  1. Investing

    Receivables Turnover Ratio

    The receivables turnover ratio is a measure used to quantify a firm's effectiveness in extending credit as well as collecting debts. Learn more about it here.
  2. Fundamental Analysis

    The Importance Of Analyzing Accounts Receivable

    While investors often focus on revenues, net income, and earnings per share, they should not overlook the importance of analyzing accounts receivable.
  3. Economics

    What's an Allowance for Doubtful Accounts?

    The allowance for doubtful accounts represents the percentage of the accounts receivable the company expects to write-off as uncollectible.
  4. Options & Futures

    20 Investments: Collectibles

    What Is It? Generally speaking, a collectible is any physical asset that appreciates in value over time because it is rare or it is desired by many. Many people think of collectibles as things ...
  5. Economics

    What are Receivables?

    Receivables are debts, transactions or other obligations owed to a company by its debtors or customers.
  6. Taxes

    The Risks of Investing in Art and Collectibles

    Investing in art and collectibles has the potential to lead to a big payday, but it's often a difficult road.
  7. Options & Futures

    Financial Statements: Revenue

    By David Harper (Contact David)Revenue recognition refers to a set of accounting rules that governs how a company accounts for its sales. Many corporate accounting scandals have started with ...
  8. Professionals

    Effects Of Off-Balance Sheet Financing Transactions On Financial Ratios

    CFA Level 1 - Effects Of Off-Balance Sheet Financing Transactions On Financial Ratios. Examine the impact of off-balance-sheet financing transactions on financial ratios. Provides effects of ...
  9. Taxes

    The Advantages of Investing in Art & Collectibles

    Investing in collectibles can be profitable and fun, and can offer tax benefits for some.
  10. Investing

    What's an Average Collection Period?

    Average collection period is an accounting term referring to the average number of days between a sale made on credit, and receipt of the payment. Businesses monitor this number to make sure ...
RELATED FAQS
  1. Why is Average Collection Period important to a company?

    Discover why the average collection period can be a particularly important accounting ratio for a company that relies heavily ... Read Answer >>
  2. How is cash flow affected by Average Collection Period?

    See how reducing a company's average collection period can help cash flow, and learn why collections practices are so important ... Read Answer >>
  3. How should investors interpret accounts receivable information on a company's balance ...

    Analyze accounts receivable information on a company's balance sheet carefully. Receivables offer confidence of future cash ... Read Answer >>
  4. What is the formula for calculating the receivables turnover ratio?

    Find out how to calculate the accounts receivable turnover ratio for a business, which should highlight how efficiently the ... Read Answer >>
  5. In which industries is Average Collection Period most important?

    Find out which industries are most concerned with average collection period, and how different types of companies interact ... Read Answer >>
  6. How can a creditor improve its Average Collection Period?

    Read about some of the ways that a business can improve its accounts receivable management practices to shorten its average ... Read Answer >>
Hot Definitions
  1. Goodwill

    An account that can be found in the assets portion of a company's balance sheet. Goodwill can often arise when one company ...
  2. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. ...
  3. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  4. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
Trading Center