OpenTuition.com Free resources for accountancy students
Free ACCA and CIMA on line courses | ACCA , CIMA, FIA Notes, Lectures, Tests and Forums
ACCA F9 lectures | Download F9 notes
March 7, 2018 at 10:35 am
I’m sorry if this is a stupid question but I’m a bit confused between the efficiency ratios (page 21 of the notes) and the operating cycle (page 22). I thought they both show how quickly debts are collected, payables are sold. Would you be able to clarify the difference between the two sets of ratios and when each should be used. Many thanks.
John Moffat says
March 7, 2018 at 2:28 pm
The operating cycle is on page 21 of our notes looks at how long cash is tied up for in working capital.
The efficiency ratios are on page 19. and they look at each item individually.
The operating cycle is looking at the overall affect rather than each item individually.
January 20, 2018 at 12:25 pm
Sir if i have given average receivable and end of the year receivable and to question say to calculate receivable day ? Which one is more appropriate average or end figure?? Sir
January 20, 2018 at 9:43 pm
Average is more appropriate, but usually we only know about the year end receivables.
November 24, 2017 at 6:27 am
Dear Sir, Thank you for the lecture. Just one moment that remained unclear to me in the example 1 – why do we take just the Purchases of raw material figure (as Credit purchases) to calculate Payables days? In my opinion we should also take indirect cost (i.e. Cost of production) for the calculation, as ,e.g. salary of workers, facilities rent charges, electricity etc. are also part of payables. Am I not right?
Thank you in advance
November 24, 2017 at 8:21 am
You are right, but in the exam you have to make the best use of the information available in the question.
November 26, 2017 at 5:49 pm
November 27, 2017 at 7:11 am
You are welcome 🙂
November 20, 2017 at 7:35 pm
Sir, A slight confusion related to arthimatic. Can you explain if working capital=current assets less payables. But if a company decide to finance his whole working capital through current liabilities then they might cancel out each other?
Thanks in advance Sir for making every topic crystal clear.
November 21, 2017 at 1:12 pm
If the current assets were equal to the payables, then the working capital would be zero and would not need financing.
However it is unlikely that this would be the case – partly because current assets will be receivables plus inventories, and partly because receivables will be at selling price whereas payables will be at cost and so you would usually expect that receivables would be higher than payables.
August 3, 2017 at 10:15 pm
Thank you for a great lecture Sir.
I know you have mentioned in your lecture that we should use logic when dealing with the average amounts used to determine the effective ratios for the operating cycle,I however struggle with knowing when do I assume that the figures from the statement of position represents an average amount,as in my mind the statement of financial position figures are as at a specific point in time,and therefore do not necessarily represents the average amounts for the covered period.
August 4, 2017 at 6:27 am
No – what I said was that although ideally we would use the average receivables etc., in practice and in the exam we use the figures at the end of the year (unless the question specifically tells you what the average was).
August 10, 2017 at 5:13 pm
Thank you Sir ,highly appreciated .
July 29, 2017 at 8:48 am
A great lecture sir, Sir i just wish to have more light on this observation from the example. We have as Receivable=73 days payables = 61 days _____ 12 DAYS . Can we say this 12 days is the daily fluctuation in working capital that need to be financed from temporary capital.
July 29, 2017 at 6:21 pm
Not really because there is also inventory.
the next lecture deals with this when we look at the operating cycle.
You must be logged in to post a comment.