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Ask the Tutor ACCA FM

Financing cost

IIlham5y ago
Does financing cost include both overdraft and money tied up in inventory and receivables?
John MoffatJohn MoffatTutor5y ago#1
The financing cost is the interest cost of money. Higher receivables and inventory will result in either a bigger overdraft (and therefore more interest payable) or less cash in the bank (and therefore the cost of receiving less interest than they would otherwise have received).
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