What is meant by 'Accounts Receivable' in financial terms?

'Accounts Receivable' refers to the money that customers owe to a company for goods or services that have been delivered but not yet paid for. This asset is expected to be collected within a relatively short period, typically within one year, making it a critical component of a company's working capital. When a company sells products or services on credit, it creates an account receivable, which reflects the amount due from the customer.

This concept is essential for understanding a company's cash flow management, as it shows how much income can be anticipated in the near future. Accounts receivable is a significant indicator of a company's liquidity and overall financial health; higher accounts receivable may indicate strong sales performance, while high levels may also raise concerns about collections and customer creditworthiness.

Other financial terms such as payments due to suppliers, long-term investments, and cash on hand do not pertain to accounts receivable, as they represent different aspects of the accounting balance sheet. Payments due reflect liabilities, long-term investments indicate assets held for longer periods, and cash on hand shows liquid assets readily available for business operations.