Accounts Receivable (AR) performance affects the Cash Asset Ratio by influencing the liquidity position of a company. Efficient AR management, resulting in faster collections and reduced outstanding balances, can improve the Cash Asset Ratio by increasing the proportion of cash and cash equivalents relative to current liabilities. Conversely, poor AR performance, with prolonged collection times and higher levels of overdue invoices, may lower the Cash Asset Ratio, indicating potential liquidity challenges.
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