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in working capital chapter
if we have receivable of say 50000 at the end of the year, then to finance it by overdraft (interest 10%p.a) the finance cost is calculated as= 50000 x 10%
but my question is if receivables days are calculated as 60 days…….Doesn’t that mean we need to finance it for 60 days out of 365
so 10% p.a isn’t that will be like (50000 x 10% x 60/365)or we don’t do that as receivable balances will be same throughout the year as sales are happening, so company need to keep that finance for whole year so full 10% is charged.
Am i right. Just wanted the logic behind it.Yes – your final paragraph is correct.
I don’t know if you are referring to the chapter in our free lecture notes, but if you are then I hope you are not using the notes without watching the free lectures. It is in the lectures that I explain and expand on the notes – they are only lecture notes and are not enough by themselves. If you are not watching the lectures for any reason then you must buy a Study Text from one of the ACCA approved publishers and study from there.
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