• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

ACCA Webinars: How to earn marks in Strategic Professional Exams. Learn more >>

20% off BPP Books for ACCA & CIMA exams - Get BPP Discount Code >>

INTERPRETATION OF FINANCIAL STATEMENTS

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › INTERPRETATION OF FINANCIAL STATEMENTS

  • This topic has 1 reply, 2 voices, and was last updated 2 months ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • May 16, 2022 at 3:17 am #655782
    AbrahamChinYuan
    • Topics: 15
    • Replies: 15
    • ☆

    Hi Sir,

    Below is the question from Kaplan exam kit.

    436) In an attempt to increase sales revenue during the year, C Co offered extended credit terms to its major customers. Whilst many major customers took advantage of the extended credit period, C Co did not increase its volume of sales.

    What impact did this have upon the current ratio?

    A There was no change to the current ratio

    B It is not possible to determine the impact on the current ratio as there is insufficient
    information available.

    C The current ratio increased

    D The current ratio decreased

    The answer given is C and the explanation given is

    “If credit customers take advantage of extended credit periods, this will increase trade
    receivables. If all other factors remain unchanged, there will be an increase in current assets
    and, consequently, in the current ratio.

    But i think the answer is A since question mentioned “did not increase its volume of sales”, hence the trade receivables should remain the same and hence the current asset remains

    May 16, 2022 at 6:16 am #655789
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49921
    • ☆☆☆☆☆

    Suppose sales are $1,000 per month.

    If they give 1 months credit then receivables will be $1,000.

    However if they give 2 months credit then they will always be being owed for 2 months sales and therefore the receivables will be $2,000.

  • Author
    Posts
Viewing 2 posts - 1 through 2 (of 2 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

ACCA News:

ACCA Introducing professional skills into the Options exams

ACCA Professional Skills Webinar – Register now

Donate

If you have benefited from OpenTuition please donate.

Specially for OpenTuition students

20% off BPP Books

Get BPP Discount Code

Latest comments

  • John Moffat on FA Chapter 23 Questions Group Accounts The Consolidated Statement of Financial Position (2)
  • John Moffat on Double Entry Bookkeeping (part b) – ACCA Financial Accounting (FA) lectures
  • John Moffat on MA Chapter 5 Questions Ordering and Accounting for Inventory
  • John Moffat on MA Chapter 5 Questions Ordering and Accounting for Inventory
  • John Moffat on FA Chapter 4 Questions Accruals and Prepayments

Copyright © 2022 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in


We use cookies to show you relevant advertising, find out more: Privacy Policy · Cookie Policy