Total Receivables is money owed to the company. Total Receivables equals receivables minus bad debt. Whenever a company sells its goods, they typically extend credit to the purchaser. The purchaser receives the goods and pays later.
Companies in a highly competitive industry extend credit to the purchaser for longer periods of time. The purchaser receives the goods now and pays next year. In contrast, a company with a Durable Competitive Advantage receives their payments sooner. Get the goods now and pay next month.
Compare the company's Total Receivables to Revenue to it's competitors. The lesser, the better.
Equation
Total Receivables to Revenue must be consistently less than its competitors:
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