Comments

  1. Profile photo of shahz20 says

    Dear John,
    I don’t understand the workings provided in the back of the notes to examples 1 and 4. It’s different to how you taught in the lecture. I get the arithmetic but could you please clarify in your earliest convenience as am sitting September session. Still got a lot to do.
    Kind regards
    Shahz :)
    p.s your lectures are great as always

    • Profile photo of John Moffat says

      Have you watched the first lecture on the management of receivables (this is the second one).

      In that lecture I go through example 1 (which is ‘simple’ discounts)and the answer is the same as in the current edition of the free lecture notes.

      • Profile photo of shahz20 says

        yes, I watched the first lecture and I understand how you arrived at it. I checked the answer in the back, it is presented different. I understand the arithmetic but I want to know which way is acceptable in the Exam? Thanks
        p.s i downloaded the notes once more to double check

      • Profile photo of John Moffat says

        I don’t understand. Both the lecture and the answer at the end of the lecture notes end up with an effective annual cost of 27.75%.

        The workings are effectively the same (although how you do your workings is not relevant – simple discounts will only be asked as an MCQ and there nobody looks at your workings)

  2. avatar says

    When looking at factoring, how would you handle bad debts that existed before the factoring? In addition if the factor is only offering 80% on invoice rates at an interest rate?

    • Profile photo of John Moffat says

      Irrecoverable debts existing before using factoring would be ignored. We are looking to see if factoring would be worthwhile as a long term policy for the future. Existing bad debts would be the same whether or not we decided to factor.

      The situation where the factor charges interest on advances is dealt with in the revision lectures – I go through an example that it in the free revision notes.

    • Profile photo of John Moffat says

      There are no videos for those two examples because the technique is identical to that of simple discounts to receivables.
      You can test yourself on them (and, of course, the answers are at the back of the Lecture Notes).

      • Profile photo of Raghav says

        Thank you so much sir !!!.for such a quick reply :)
        one more thing that I want to know..the questions given in Kaplan’s complete text book are sufficient for practice .?

      • Profile photo of John Moffat says

        You should really get an Exam Kit because they contain lots of exam standard questions (including past real exam questions), and practice is vital.

    • Profile photo of John Moffat says

      It doesn’t make any difference.

      You cannot force the customers to take a discount. However, you will offer one if it costs less that the interest we would otherwise paying – and then we would hope that everyone would take advantage of it :-)

  3. avatar says

    Dear Sir Moffat,

    Thank you for your grateful lectures.
    I have one question.
    In the example 2, when interest saved on lower receivables is calculated, new level of receivables is calculated as 20 million * 54 days/365 days.
    1% of discount was offered. 60% of customers are taking the discount. So new level of receivables is 20,000,000 – 120,000 after discount.
    Why is new level of receivables calculated as above, and not as follows?
    (20,000,000 – 120,000discount) *54days/365 days?.

    Best regards

      • Profile photo of John Moffat says

        The fact the we need fewer credit control staff means that we will save 20,000 if we use the factor. The saving of 20,000 is therefore listed as a benefit of using the factor.

        Using the factor will mean that average receivables are reduced throughout the year (because we are collecting money faster). Therefore the overdraft will be reduced, and therefore there will be less interest payable. It is the interest saved that is listed as a benefit.

  4. avatar says

    the management of recievables and payables when I tried some of previous paper exams it will become complicated how can I ease them and the lecturer said first list the costs and then the savings but that didn’t work at all exercises can you show other ways to solve them ease my understanding of this management of receivable and payables

    • Profile photo of John Moffat says

      Although you can set out your workings in different ways, the approach is always the same – we need to calculate the costs and the savings resulting from the new policy and make the decision on that basis.

      Every question is worded differently and when there is a problem it is in interpreting the question.

      If you have problems with any specific past exam question then do ask in the F9 Ask the Tutor forum and I will try and help.

Leave a Reply